Extra Budget May Be Compiled for Kumamoto Quake

Tokyo, Aug. 2 (Jiji Press)–Some officials of Japanese Prime Minister Sanae Takaichi’s administration have floated the idea of compiling a second supplementary budget for fiscal 2026 in response to extensive damage caused by a massive earthquake that hit Kumamoto Prefecture, southwestern Japan, on Tuesday. The focus is on the decision of the prime minister, who prioritizes the regular budget and calls for an end to the government’s reliance on supplementary budgets. With the funding source for the planned consumption tax cut on food from next April still unclear, moving forward with additional fiscal spending could undermine market confidence, analysts said. When asked at a press conference Friday about the possibility of drawing up a supplementary budget, Chief Cabinet Secretary Minoru Kihara said, “I could not say anything at this point.” A senior government official also declined to comment on the possibility, saying, “We don’t know at this point.” There is a strong view within the government and the ruling parties that fiscal measures for disaster-hit areas can be handled with 1 trillion yen in general reserve funds earmarked to prepare for unexpected situations such as natural disasters. “For now, we can use the reserve funds,” a government source said. A former cabinet minister from the ruling Liberal Democratic Party said, “It will be enough for the time being.” In its Basic Policy on Economic and Fiscal Management and Reform approved by the cabinet in July, the government set forth the goal of reducing dependence on supplementary budgets. While the policy does not rule out compiling supplementary budgets in cases of urgent need, Takaichi has characterized the move away from reliance on supplementary budgets as a major reform. A total of 10 trillion yen in financial resources will be needed to realize the virtually zero consumption tax on food products for two years that was announced recently by the prime minister. If the government moves to compile a supplementary budget even for measures to finance reconstruction programs, it could accelerate concerns over lax fiscal discipline. On the other hand, a senior LDP official said, “From the perspective of people in disaster-hit areas, there is a difference in perception between saying, ‘We can cope with the situation with reserve funds,’ and saying, ‘We will compile a supplementary budget for reconstruction and revitalization,'” suggesting that the government will need to compile an extra budget. Following the powerful earthquakes that hit Kumamoto in April 2016, the administration of then Prime Minister Shinzo Abe drafted and passed a supplementary budget featuring reconstruction programs the following month. At a press conference Friday, Junya Ogawa, leader of the major opposition Centrist Reform Alliance, said, “While keeping in mind the need for a supplementary budget, we urged the government to take concrete measures as soon as possible.” END [Copyright The Jiji Press, Ltd.]