A supplementary budget for this fiscal year will probably total 2 trillion yen, with 1 trillion yen earmarked for policy spending related to structural reforms, Finance Minister Masajuro Shiokawa said Tuesday.
"The extra budget will focus primarily on job measures and structural reforms," Shiokawa said after a Cabinet meeting.
Shiokawa said tax revenue for the year will probably fall by some 1.1 trillion yen from initial projections. But he nonetheless said the extra budget will respect Prime Minister Junichiro Koizumi's pledge to limit new state bond issues this fiscal year to 30 trillion yen.
Koizumi's belt-tightening promise is based on an assumption that tax revenues will remain at 50 trillion yen. The 1.1 trillion yen shortfall estimate will therefore probably intensify financial market speculation that the government will fail to stick to the bond cap.
The government plans to determine the framework for the extra budget at Friday's meeting of the Council on Economic and Fiscal Policy.
Regarding the Bank of Japan's monetary policy, Shiokawa reiterated that the government wants the central bank to boost prices back to 1997 levels.
But the minister said he is not urging the BOJ to introduce inflation targeting.
Prices in Japan have been falling since 1997, severely affecting corporate income.