Japan Passes Emergency Budget

TOKYO -- Japan's parliament passed a ¥4 trillion ($49 billion) disaster relief budget Monday as ruling and opposition lawmakers put aside their differences and sought to quickly launch efforts to rebuild the country's quake-hit northeast.

But the passage of the budget is likely to clear the way for the opposition to step up their campaign to oust unpopular Prime Minister Naoto Kan, who has drawn criticism over the government's response to the magnitude 9 earthquake and subsequent tsunami on March 11, including its handling of the crisis at the Fukushima Daiichi nuclear power plant.

The extra budget, which totals ¥4.015 trillion and is the first of a planned series of spending packages to deal with the aftermath of the disaster, doesn't involve additional government borrowing as it will be financed by funds previously earmarked for other spending.

"We will work hard to swiftly implement the budget to help the disaster-hit area get back on its feet," Finance Minister Yoshihiko Noda told a news conference following the budget's passage.

The budget will be used for measures such as removing debris, building temporary housing and repairing infrastructure, as well as providing financial support to businesses affected by the disaster, which has left more than 25,000 dead or missing and is expected to cause the economy to contract in the first half of this year.

Despite more than a year of political standoff, the opposition, led by the Liberal Democratic Party, joined hands with Mr. Kan's Democratic Party of Japan, allowing the budget to pass the opposition-controlled upper chamber Monday after just two days of discussions in the chamber. The DPJ-dominated lower chamber endorsed the bills Saturday.

The move was in stark contrast to the fierce clash between the opposition and the ruling parties before the earthquake, when everything from campaign-financing scandals to differences over economic policy delayed the passage of the regular budget for the fiscal year that started in April and prevented the enactment of related legislation, including a crucial bill for issuing bonds, which has yet to clear parliament.

The government will now shift its focus to drafting a broad after-quake reconstruction plan as well as a long-term blueprint to overhaul Japan's tax and social security systems by the end of June.

The government will then compile a second extra budget to fund other quake-related measures, ministers have said.

"We need to present a source of financing in order to come up with a second supplementary budget," Economics Minister Kaoru Yosano told a separate news conference Monday.

While Mr. Noda has offered little hint on the potential size of the budget, other ministers have said it would likely be financed by new bond issuance.

The prospect of more deficit spending has led international investors to pay greater attention to the second extra budget, as such steps would further worsen Japan's battered finances, possibly making Japanese government bonds less attractive. Standard & Poor's Ratings Services last week lowered its outlook on Japan's sovereign rating to negative from stable, citing the risk of a downgrade if the earthquake causes the country's fiscal situation to deteriorate substantially more than expected.

Japan's public debt is already twice its annual economic output, the highest among industrialized countries, leading some DPJ officials to float the controversial idea of raising taxes to pay for quake relief measures.

The government has estimated direct damage from the earthquake and tsunami at ¥16 trillion to ¥25 trillion.