Japan's government could run out of money by the end of October, halting all state spending including salaries, pensions and unemployment benefits, because of a stand-off in parliament that has blocked a bill to finance the deficit.
The deficit financing bill, which would allow the government to sell bonds needed to fund almost half of the budget, has languished in parliament as the ruling Democratic Party tussles with opposition parties that can use their control of the upper house to reject legislation.
"Without this bill, the budget will collapse," Finance Minister Jun Azumi said on Friday, pleading for co-operation from the two largest opposition parties. "It doesn't matter which party is in power. I really hope that we can get a multi-partisan agreement on the deficit bill." If the bill is not passed, government spending would grind to a halt, the world's third-largest economy would be put in jeopardy and its standing among credit ratings agencies could suffer.
Japan is not the only developed nation that is staring at an imminent fiscal crisis. Greece's debt-strapped government could run out of money within weeks unless it secures a 31.8 billion euro tranche of bailout funds from the European Union. The impasse in Japan however comes just after Prime Minister Yoshihiko Noda won over the opposition to pass an increase in sales tax in the lower house of parliament. However, a section of his party quit over the vote, and is poised to form a new party.
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