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On April 12, the government and the DPJ agreed on an initial draft for a first supplementary budget that will enable prompt implementation of recovery measures in the areas affected by the Great East Japan Earthquake. Discussions are now ongoing with the various political parties with the aim being to submit legislation to the Diet by the end of April.
The initial draft proposal is for a total budget of approximately 4 trillion yen, which includes funding for disaster relief measures to be implemented prior to fully-fledged reconstruction, such as funding for the construction of temporary housing, funding for public works projects relating to disaster recovery efforts, such as the restoration of damaged roads, airports, ports and schools, and special subsidies to local governments. The sources of funding for this would come by for example reconsidering the supplementary payments which were to be introduced for the child allowance from the new financial year, and by temporarily reducing the burden of pension payments borne by the state from one half to one third. A proposal to reduce the allowances paid to Diet members by 3 million yen per Diet member for a total saving of 2.2 billion yen is also included.
In addition, emergency revisions to the tax system will be made. For a period of three years, the ceiling for tax deductions on charitable donations made in relation to the disaster will be raised from 40% to 80% of the total assessable income, with taxpayers also having the option of applying for a tax credit with respect to such donations. In addition, donations collected by authorized NPOs to be used for disaster relief will be treated in the same way as donations made to the Japanese Red Cross.
In the meeting of the policy research chiefs of the DPJ and LDP held in the afternoon of April 15, the Chair of the LDP Policy Research Council Shigeru Ishiba, submitted the following opinions to DPJ Policy Research Committee Chair Koichiro Gemba: (1) In order for Japan as a nation to make a concerted effort to deal with this unprecedented disaster the LDP would do their best to cooperate with the DPJ proposal, (2) In response to calls from the affected areas, 5 items totalling 542 billion yen in spending, including financial assistance for small and medium-sized businesses in the disaster zone, should be added, (3) the provision of child allowance and individual household compensation payments for farmers should be reconsidered, and the reductions in the burden of pension payments borne by the government and in the ODA budget should not be implemented, with the shortfall made up by issuing “reconstruction and revitalization bonds”.
Gemba responded: (1) With regard to the child allowance, the government and ruling party intended to continue with frank discussions, including regarding the form of the system itself, (2) With regard to individual household compensation payments for farmers, the farming preparations for the new year are already underway, and so a sudden revision of the system would cause confusion in the agricultural sector, (3) Increasing the issue of government bonds from the first supplementary budget would be difficult from the perspective of maintaining confidence in the bonds market, and so the government would respond first of all by reviewing spending, (4) The portion of the basic pension borne by the state is one half, and the shortfall between that and the one third proposed would be made up from funds secured by comprehensive reform of the tax system, and it is clearly stated in legislation that such funding would be apportioned to pension funding from the next fiscal year onwards.
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