The ruling Democratic Party of Japan has earmarked more than 11 trillion yen ($144 billion) to finance post-quake reconstruction and implement measures to cope with the strong yen.
The allocation is for the third supplementary budget for fiscal 2011.
The extra budget is set to be submitted to the Diet for deliberations in late October.
It includes funding for radioactive decontamination triggered by Fukushima No.1 nuclear power plant accident and disaster relief from Typhoon No. 12 that swept through Japan earlier this month.
Of the 11 trillion yen, 5.5 trillion yen will cover package reconstruction grants to be allocated to local governments and subsidies for rebuilding businesses as part of efforts to reconstruct the local economy.
Officials said 600 billion yen has been set aside for low-interest loans for earthquake and tsunami victims.
In addition, 500 billion yen will be spent on disaster preparedness work. The funds will go to repair roads, shore up rivers and make school buildings quake-resistant.
The budget will also allocate additional local tax grants worth 1.6 trillion yen and 50 billion yen to settle a lawsuit by hemophiliacs who are thought to have contracted Hepatitis B through the repeated use of needles during mass vaccinations.
Officials said 2.5 trillion yen would be shifted to the national pension fund program to make up for funds also used in the aftermath of the 3/11 disaster.
The budget will allocate 300 billion yen for relief work following Typhoon No. 12.
Executives of the DPJ tax commission, which has been discussing tax increases to finance reconstruction, agreed in a meeting Sept. 22 to raise income and corporate taxes, as well as tobacco taxes following recommendations from the Government Tax Commission. The steps will be implemented for 10 years from fiscal 2012.
As an additional step, the panel decided to raise inheritance tax.
The DPJ panel will now seek to build consensus within the party so that they measures are implemented.
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