Cabinet OKs 4.79 trillion yen 2nd extra budget for FY 2008+

TOKYO, Dec. 20 Kyodo - The Cabinet on Saturday approved a 4.79 trillion yen second supplementary budget for the current fiscal year, which rolls out support measures for households, small businesses and regional economies hit hard by the ongoing sharp economic slowdown.

The extra budget was compiled to finance a 26.9 trillion yen second stimulus
package unveiled by Prime Minister Taro Aso in late October, and features a
2.04 trillion yen cash benefit program. It is expected to be presented to the
Diet on Jan. 5 for deliberations.
The supplementary budget will actually involve a total of 4.85 trillion yen in
fiscal spending, but the government will slim down the total with cost-cutting
measures.
It also refers to financial steps stipulated in the stimulus package, such as
the initiative to allow an existing government-backed entity to buy 20 trillion
yen in shareholdings from banks and raising the limit on public funds reserved
for injection into ailing banks from 2 trillion yen to 12 trillion yen.
As for specific projects, the extra budget earmarks 490.5 billion yen to expand
a credit guarantee program and safety-net loans to small businesses, 500.0
billion yen to sharply lower expressway tolls, 600.0 billion yen to revitalize
regional economies and 160.0 billion yen to support municipalities that hire
sacked workers.
The size of the second extra budget exceeds the 1.81 trillion yen first
supplementary budget for fiscal 2008 enacted in October, which was aimed at
supporting businesses and livelihoods affected by higher commodity prices.
The government is planning to implement the first and second extra budgets as
well as the fiscal 2009 budget ''seamlessly'' to effectively shore up the
economy. The principal budget for the next fiscal year will also be submitted
to the Diet in January.
So as not to further worsen the nation's fiscal position, the government will
tap reserves in special account budgets to secure financial resources to cover
necessary expenses for projects in the second extra budget. Japan's fiscal
position is already the worst among developed countries.
The government will mainly rely on reserves originally intended to prepare for
wild fluctuations in interest rates on national bonds. It plans to divert 4.16
trillion yen from the reserves and also to raise 390.0 billion yen through the
issuance of construction bonds to finance the extra budget.
The second supplementary budget will also adjust tax revenues for fiscal 2008,
which are expected to undershoot the initial projection due to the economic
downturn.
It estimates tax revenues will fall 7.13 trillion yen short of the original
projection. To plug the gap, the government will raise 6.69 trillion yen by
floating deficit-covering bonds and 346.0 billion yen by issuing construction
bonds.