The Cabinet of Prime Minister Yoshihiko Noda on Oct. 7 approved a third supplementary budget that includes 9.1 trillion yen ($119 billion) to go toward rebuilding efforts following the Great East Japan Earthquake.
The total amount of the third supplementary budget is about 12 trillion yen, and the government is positioning 1.9 trillion yen of that for measures to deal with the stronger yen by providing subsidies to manufacturers as long as a certain number of jobs are created in the disaster-stricken areas.
The central government also put together an outline of legislation that includes provisions for increases in income and corporate taxes for repaying the government bonds to be issued to pay for the rebuilding measures.
The basic policy released by the central government calls for 6.1 trillion yen in direct rebuilding measures to be distributed as grants to local governments, 600 billion yen in disaster-related loans to companies that have been affected by the negative publicity arising from the accident at the Fukushima No. 1 nuclear power plant as well as 200 billion yen to pay for decontaminating the radiation spewed from the crippled Fukushima plant.
In terms of revenues to pay for the rebuilding measures, the basic policy states that 5 trillion yen will be raised over a five-year period through expenditure cuts and nontax revenues. Over a 10-year period, such revenues will total 7 trillion yen.
There is no mention of the 11.2 trillion yen to be raised through tax hikes, with the only figure included being a 9.2 trillion yen one, that includes the 7 trillion yen in nontax revenues.
The absence of the 11.2 trillion yen figure is intended to show the government's resolve to further reduce the tax hike figure.
The basic policy calls for the early selling of government holdings of Japan Tobacco Inc. stock as well as stock held in the energy countermeasures special account to raise nontax revenues.
The outline of the proposed taxation legislation states that income taxes will be increased by 4 percent, corporate taxes by 10 percent and the tobacco tax will be increased 2 yen per cigarette.
Government bonds to pay for rebuilding measures will be issued over five years and fully repaid by fiscal 2022.
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