The Diet has passed a ¥1.808 trillion supplementary budget for fiscal 2008 with the support of not only the ruling Liberal Democratic Party and Komeito but also of the Democratic Party of Japan and two other opposition groups. Japan, however, is about to face difficult times, as the financial crisis that started in the United States shows threatening signs of impacting the real economy. The government now needs to promptly work out an additional economic package.

The supplementary budget was written by the administration of former Prime Minister Yasuo Fukuda in late August — primarily to help small and medium-size businesses hit by steep price rises in oil and other materials. It features ¥446.9 billion for small and medium-size enterprises, including ¥400 billion for credit guarantees for such enterprises, and ¥151 billion for agriculture and fisheries, including funds to promote energy-saving measures in these sectors.

With the current economic situation, however, it is imperative that more measures be made to help increase domestic demand and make funds available to business enterprises. Reportedly, an additional economic package is being planned by the government in the form of a second supplementary budget for fiscal 2008. It will include a fixed-amount income-tax reduction, a tax cut to stimulate capital investment (especially for energy savings), an expansion of a tax cut for households paying mortgages and the continuation of a low capital gains tax. It is reported that the government also plans to revive a law that will inject capital into local banks to prevent a credit crunch for local enterprises. This package is expected to be submitted to the Diet early next year.