The government plans to use money earned from investing the nation's currency reserves to repay short-term debt tied to foreign exchange operations, according to a bill OK'd Friday by the Cabinet.
Proposed legislation taking effect in April 2013 will authorize using the cash to pay off financing bills, such as those sold to fund currency interventions. Since last April, temporary approvals have allowed such transactions, and a law would set up a permanent mechanism. The bills are also used to generate yen when the government wants to lend money from the foreign exchange account.
Management of the nation's finances is under scrutiny as the government seeks to weaken the yen and support a recovery from last year's earthquake and tsunami without swelling the world's biggest public debt burden. Ratings company Standard & Poor's said last month that another downgrade of the nation's AA- debt ranking is likely if medium-term growth prospects worsen.