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Updated Thursday, July 28, 2011 11:14 am TWN, By Tetsushi Kajimoto, Reuters

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Budget to await new premier: Japan

TOKYO -- The Japanese government will wait until it has a new premier before compiling its first large-scale post-quake reconstruction budget, to be worth more than 10 trillion yen (US$128 billion), after Prime Minister Naoto Kan resigns as promised, the No. 2 official of the ruling Democratic Party said.

That spending would come on top of a combined 6 trillion yen Tokyo has already set aside in two extra budgets that were compiled without funds from new borrowing, to put off adding to a huge public debt already twice the size of Japan's US$5 trillion economy.

The government will issue 10 trillion yen in reconstruction bonds to finance the new spending and repay them over the next five to 10 years through tax hikes, Katsuya Okada, secretary-general of the ruling Democratic Party, told reporters on Wednesday.

“The responsibility for formulating the third extra budget and putting it to parliament for deliberation is going to belong to a new prime minister,” he said.

Okada remained vague on the question of a time frame for taking up the next budget, with Prime Minister Kan still giving no departure date after agreeing to resign but then saying he would not leave until three key bills had passed through parliament. “There should not be any big delays but at this point it's difficult to say when,” Okada said. “It is going to be a little further away.”

Political wrangling over the fate of the unpopular Kan, under fire for his handling of the radiation crisis at Tokyo Electric Power's tsunami-hit Fukushima plant, is threatening to further delay large-scale spending to rebuild Japan's devastated northeast after the March 11 earthquake and tsunami.

Kan, whose support rate among the public has sunk to 17.1 percent, said on Tuesday the time was not right to call a snap election for parliament's main lower house, although speculation lingers that he may use the threat of a snap election to keep his ruling-party colleagues from ousting him before he is ready to go.

Kan said the next general election should be held in the summer of 2013, when an election for the upper chamber is also scheduled.

Okada said he believed that Kan would not call a snap election for the lower chamber to break a political deadlock that has blocked progress on issues ranging from the budget to energy policy, but that he should step down in the near future.

“The decision to dissolve the lower house rests with the prime minister, but I, as the party's number two and secretary general, believe that Prime Minister Kan won't call a snap election under the current circumstances.”

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