The Democratic Party of Japan-led government bowed to strong opposition within its ranks Friday and endorsed a watered-down version of its basic reconstruction policy for the Tohoku region that ultimately failed to specify the size and duration of a tax hike to fund the work.
According to the basic policy, the government plans to spend at least ¥23 trillion over a 10-year period to rebuild the areas devastated by the March 11 megaquake and tsunami.
The original basic policy stipulated the need to secure ¥10 trillion through an emergency tax hike that would be imposed for between five and 10 years, without stipulating what taxes may be targeted.
But after the draft was strongly criticized by DPJ lawmakers, who voiced concern over increasing the burden on taxpayers and the potential impact on the economy, the government removed all references to the size and duration of the tax rise.
The government now plans to draft a third supplementary budget for fiscal 2011 based on the basic policy for a "full-blown" reconstruction of northeastern Japan.
During a meeting with Cabinet ministers Friday evening, Prime Minister Naoto Kan expressed satisfaction over the basic guidelines, stressing that they included the requests of local governments, as well as a list of necessary measures and revenue sources.
"I would like to do my utmost to make steady progress in regenerating the disaster areas, rebuilding the lives of disaster victims and re-creating a vibrant Japan," Kan said.
Of the ¥23 trillion, the government intends to use ¥19 trillion in the first five years. This figure includes the ¥6 trillion that has already been secured in the first and second extra budgets for fiscal 2011.
The remainder will be covered by cutting expenditures, including possibly curtailing child allowances, selling government assets and introducing special taxes.