Japan's finance minister on Friday welcomed a ruling party deal with the opposition on tax hikes to fund rebuilding after the quake in March, paving the way for the passage of a $155 billion emergency budget in a split parliament.
The compromise deal calls for raising 10.5 trillion yen ($135 billion) mainly through income and corporate tax hikes - worth 7.5 trillion yen and 2.4 trillion yen respectively - but doubles the period for achieving this to 25 years while excluding a touted increase in tobacco tax.
The ruling Democrats struck the deal on Thursday with opposition parties - which have control the upper house of parliament and can block bills - caving into their demand for dropping the tobacco tax hike and spreading the income tax burden over an extended period.
"I appreciated the agreement," Finance Minister Jun Azumi told reporters after a cabinet meeting. "The extra budget has passed the lower house so I will do the utmost to enact related bills as early as possible this month." The government aims to pass the 12.1 trillion yen ($155 billion) budget and a funding bill by the end of November to kick-start long-awaited reconstruction in the disaster-stricken north-east.
Economists and policymakers are counting on the spending to sustain Japan's economic recovery while businesses and investors fret over Europe's debt crisis. Tokyo plans total spending of 19 trillion yen over the next five years to rebuild the northeast, including 6 trillion yen already passed by parliament in two extra budgets for the year to March 2012. On Tuesday the government agreed with the opposition to extend the period over which bonds sold to fund post-quake reconstruction will be repaid. Under the deal, Japan will redeem reconstruction bonds over 25 years rather than the 10 years proposed earlier by Prime Minister Yoshihiko Noda's cabinet.
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