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Wednesday, Oct. 27, 2010

Cabinet OKs ¥5.1 trillion extra budget

Sengoku sees little opposition to stimulus plan

Staff writer

Prime Minister Naoto Kan's Cabinet on Tuesday endorsed an extra budget for this fiscal year to fund a ¥5.1 trillion emergency stimulus package aimed at fighting deflation and the surging yen.

The budget plan, which will be submitted to the Diet on Friday, includes financial support for regional economies and small businesses.

"The measures are aimed at preventing another dip in the economy triggered by the decline of the economies in Europe and the United States," said Chief Cabinet Secretary Yoshito Sengoku.

The top government spokesman also expressed hope that opposition parties will support the extra budget.

"The size and content of the extra budget have many similar points" with the stimulus proposed by the opposition parties, Sengoku said.

The Cabinet's approval of the stimulus package comes as the yen approaches its highest level against the dollar in more than 15 years, despite the first government intervention last month in over six years. The strength of the Japanese currency has negatively affected the country's export-oriented economy.

The package will be financed by a ¥2.2 trillion increase in tax revenues this fiscal year and a ¥2.2 trillion surplus carried over from the previous fiscal year's budget.

The government will not issue any new government bonds, the first time in 11 years there will be no issuance of new JGBs an extra budget to fund a stimulus package.

In the stimulus package, ¥3.1 trillion is earmarked for regional economies, small and midsize businesses and building infrastructure, while ¥1.1 trillion is allocated for welfare and child-rearing measures.

About ¥87.2 billion was also allocated to secure rare earth imports, following China's effective export ban to Japan amid the dispute over a run-in near the Senkaku islets.

The ban was triggered by Japan's detention of a Chinese boat skipper whose ship collided with Japan Coast Guard vessels near the Japan-administered Senkaku Islands.

The latest stimulus follows a ¥918 billion package approved last month, and highlights Kan's resolve to prevent the economy from falling into recession amid high unemployment, falling prices and weakening exports and output.

Information from Kyodo added

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