ID :
172534
Fri, 04/01/2011 - 18:16
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https://oananews.org//node/172534
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DPJ eyes special taxes, 'disaster bonds' to raise quake-relief funds
TOKYO (Kyodo) - The Democratic Party of Japan is considering introducing special taxes as well as issuing ''disaster bonds'' to be underwritten by the Bank of Japan as the ruling party struggles to secure funds for reconstruction after the March 11 earthquake and tsunami, party sources said Friday.
Some Cabinet members and BOJ policymakers expressed their concerns, however, about moves by some lawmakers to force the central bank to directly purchase long-term debt from the Finance Ministry, which has been basically prohibited by law, while citing fears of further deterioration in the country's fiscal health and damage of public trust in the Japanese currency.
The government of Prime Minister Naoto Kan, who heads the DPJ, aims to submit a bill to the Diet within this month in order to enable a set of policy measures that would help accelerate the effort for rebuilding following the disaster.
A draft of the bill, prepared by the party, mentioned the introduction of special taxes. But there is opposition to any move that would increase burdens on quake victims while concerns remain that increasing tax burdens would hurt economic activities, the sources said, adding it is uncertain whether the DPJ can reach a consensus within it.
The draft also proposed that the government issue the debt designed to raise relief funds and have the BOJ underwrite it. But the idea is facing opposition from some ministers and BOJ policymakers.
''It is impossible and I will never have (the BOJ) do such a thing,'' economic and fiscal policy minister Kaoru Yosano said earlier in the day, trying to silence calls by some lawmakers for the BOJ to print money more flexibly under the government's initiative.
''Taking actions that ignore fiscal discipline would lead (Japan) to lose its international credibility,'' Yosano told reporters, while suggesting the government might suffer a sharp rise in interest rates if it recklessly issues debt.
Finance Minister Yoshihiko Noda told a press conference, ''It is not the case that the government is studying'' the option.
BOJ Governor Masaaki Shirakawa has expressed his opposition to the possible underwriting, saying the country's past experience demonstrates that such a policy would ''set off raging inflation...(and) damage public trust in the (Japanese) currency.''
The BOJ currently purchases long-term government bonds from financial institutions in markets under certain rules as part of its daily operations to adjust monetary conditions.
The Public Finance Act allows the bank's underwriting of sovereign debt only in exceptional cases, such as buying financing bills to provide short-term money for currency market interventions.
''Once introduced, (the underwriting) could lead to overissuance (of debt), triggering inflation and making people wary of using banknotes,'' Sayuri Shirai, who joined the BOJ Policy Board on Friday, said at a news conference.
Most other major central banks are also prohibited from underwriting government debt, the former International Monetary Fund economist underlined. ''We need to properly take into consideration such an international consensus.''
Also Friday, Noda said the government is considering retaining 5 percent of its public works and other expenditures for fiscal 2011 and shifting the money into reconstruction work.
He made a request to other ministers for the arrangement that would help secure some 300 billion yen ($3.6 billion).
Some Cabinet members and BOJ policymakers expressed their concerns, however, about moves by some lawmakers to force the central bank to directly purchase long-term debt from the Finance Ministry, which has been basically prohibited by law, while citing fears of further deterioration in the country's fiscal health and damage of public trust in the Japanese currency.
The government of Prime Minister Naoto Kan, who heads the DPJ, aims to submit a bill to the Diet within this month in order to enable a set of policy measures that would help accelerate the effort for rebuilding following the disaster.
A draft of the bill, prepared by the party, mentioned the introduction of special taxes. But there is opposition to any move that would increase burdens on quake victims while concerns remain that increasing tax burdens would hurt economic activities, the sources said, adding it is uncertain whether the DPJ can reach a consensus within it.
The draft also proposed that the government issue the debt designed to raise relief funds and have the BOJ underwrite it. But the idea is facing opposition from some ministers and BOJ policymakers.
''It is impossible and I will never have (the BOJ) do such a thing,'' economic and fiscal policy minister Kaoru Yosano said earlier in the day, trying to silence calls by some lawmakers for the BOJ to print money more flexibly under the government's initiative.
''Taking actions that ignore fiscal discipline would lead (Japan) to lose its international credibility,'' Yosano told reporters, while suggesting the government might suffer a sharp rise in interest rates if it recklessly issues debt.
Finance Minister Yoshihiko Noda told a press conference, ''It is not the case that the government is studying'' the option.
BOJ Governor Masaaki Shirakawa has expressed his opposition to the possible underwriting, saying the country's past experience demonstrates that such a policy would ''set off raging inflation...(and) damage public trust in the (Japanese) currency.''
The BOJ currently purchases long-term government bonds from financial institutions in markets under certain rules as part of its daily operations to adjust monetary conditions.
The Public Finance Act allows the bank's underwriting of sovereign debt only in exceptional cases, such as buying financing bills to provide short-term money for currency market interventions.
''Once introduced, (the underwriting) could lead to overissuance (of debt), triggering inflation and making people wary of using banknotes,'' Sayuri Shirai, who joined the BOJ Policy Board on Friday, said at a news conference.
Most other major central banks are also prohibited from underwriting government debt, the former International Monetary Fund economist underlined. ''We need to properly take into consideration such an international consensus.''
Also Friday, Noda said the government is considering retaining 5 percent of its public works and other expenditures for fiscal 2011 and shifting the money into reconstruction work.
He made a request to other ministers for the arrangement that would help secure some 300 billion yen ($3.6 billion).
