Japan cabinet approves $66b extra budget to fund stimulus

TOKYO (REUTERS) - Japanese Prime Minister Shinzo Abe's cabinet approved on Thursday a US$53 billion (S$66 billion) extra budget for the current fiscal year to fund stimulus steps announced last week aimed at offsetting the blow from a planned increase in the national sales tax.

The size of the supplementary budget comes to 5.46 trillion yen (S$66 billion), following a 13.1 trillion yen extra budget compiled in January to stimulate the economy, according to the Ministry of Finance.

The latest budget will bring government spending for fiscal 2013/14, which ends in March, to about 98.1 trillion yen.

That compares with 100.5 trillion yen earmarked the year before, suggesting that Japan's spending remains expansionary.

It underlines the need for Abe to strike a balance between boosting near-term growth and reining in a huge public debt.

The focus will now shift to a draft annual budget for the next fiscal year from April, to be compiled later this month.

Abe's government could face stiff resistance against spending cuts, with budget requests from ministries totalling a record 99.3 trillion yen for fiscal 2014/15.

The government does not need to issue additional new bonds to fund the latest extra budget, as it scrapes together revenue such as bigger-than-expected tax receipts in the current year.

Last week the cabinet approved an 18.6 trillion yen stimulus package, including 5.5 trillion yen in government spending, to bolster the economy ahead of the sales tax hike in April.

Tokyo plans to raise the sales tax in April to 8 per cent from the current 5 per cent, and to 10 per cent in October 2015, to pay for ballooning social security costs in a fast-ageing society.

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