Japan's government may need to spend over 10 trillion yen ($120 billion) in emergency budgets for post-quake disaster relief and reconstruction, with part of them possibly covered by new taxes, deputy finance minister Mitsuru Sakurai signalled today.
Sakurai told a news conference he hoped the government could ask the public to help shoulder the burden of reconstruction while a newspaper reported Tokyo was working on legislation that would introduce additional taxes and special bonds to help finance the rebuilding effort.
The Nikkei newspaper also said the bill could pave the way for the Bank of Japan to directly buy government bonds, something it can be allowed to do only under special circumstances.
Bank of Japan Governor Masaaki Shirakawa has repeatedly rejected such an idea floated by some ruling party and opposition lawmakers, saying such a move could unsettle the bond market and undermine investor confidence in the yen. Government ministers have so far denied considering such a plan.
Japan faces its biggest reconstruction effort since the post-World War Two period after the 9 magnitude earthquake and a deadly tsunami hit Japan's northeast on March 11, leaving more than 27,500 dead or missing and triggering the world's worst nuclear crisis in 25 years.
The government estimates the material damage alone could top $300 billion, making it by far the world's costliest natural disaster. In the immediate aftermath of the quake, officials were offering assurances that no tax increases were planned to finance that effort.
But they later changed tack and Prime Minister Naoto Kan told parliament earlier this week that he would not rule out any source of funding, including a tax increase or dropping a plan to cut corporate tax.
The extra disaster levy could come in the form of an increase in sales, corporate or personal income taxes, the Nikkei said without citing any sources. The special bonds would serve to finance rebuilding of roads, sewers and other infrastructure in the worst-hit areas, it said.
