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175987
Mon, 04/18/2011 - 03:49
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http://m.oananews.org//node/175987
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Japan Govt Preparing Reconstruction Bonds
Tokyo (Jiji Press) - The Japanese government is discussing plans to issue bonds to raise funds for reconstruction of areas hit by the March disaster by ensuring their redemption through a new tax, informed sources said Saturday.
The "reconstruction bonds" would be managed in a separate account from one for existing government bonds. There is also an idea of setting up a "reconstruction fund" to pool funds raised through reconstruction bonds and the new tax and managing them together, according to the sources.
The new "reconstruction tax" would be a provisional one for three to five years, the sources said.
The government aims to win market trust with a credible redemption plan as Japan's fiscal conditions are already severe, according to the sources.
It is apparently inevitable for the government to finance reconstruction projects, expected to cost over 10 trillion yen, without any new bond issues.
The government, nonetheless, plans to avoid fresh bond issuance under the first fiscal 2011 supplementary budget worth some 4 trillion yen, which it will propose later this month.
Ill-planned bond issues could have a negative impact on markets, such as a rise in log-term interest rates, now that long-term debts of the Japanese central and local governments are estimated to have totaled 869 trillion yen at the end of March.
To fend off those concerns, the government is considering making maturities of reconstruction bonds much shorter than those for ordinary government bonds, the sources said.
It also plans to limit the use of the proceeds from the bonds to such reconstruction projects as building infrastructure like roads and ports and supporting small and midsize businesses.
The government would ensure transparency of flows of the funds by separating them from other budgets, the sources said.
Introducing a reconstruction tax was proposed at the first meeting on Thursday of the government's reconstruction panel, chaired by Makoto Iokibe, president of the National Defense Academy of Japan.
The government is considering raising the consumption tax or income tax as the reconstruction tax. A one-percentage point hike in the consumption tax rate would push up revenue by some 2.5 trillion yen a year, while a 10-point hike in the income tax rates would lead to additional revenue of one trillion yen.
The tax hike would be determined after fiscal 2012 based on the economic situation.
The "reconstruction bonds" would be managed in a separate account from one for existing government bonds. There is also an idea of setting up a "reconstruction fund" to pool funds raised through reconstruction bonds and the new tax and managing them together, according to the sources.
The new "reconstruction tax" would be a provisional one for three to five years, the sources said.
The government aims to win market trust with a credible redemption plan as Japan's fiscal conditions are already severe, according to the sources.
It is apparently inevitable for the government to finance reconstruction projects, expected to cost over 10 trillion yen, without any new bond issues.
The government, nonetheless, plans to avoid fresh bond issuance under the first fiscal 2011 supplementary budget worth some 4 trillion yen, which it will propose later this month.
Ill-planned bond issues could have a negative impact on markets, such as a rise in log-term interest rates, now that long-term debts of the Japanese central and local governments are estimated to have totaled 869 trillion yen at the end of March.
To fend off those concerns, the government is considering making maturities of reconstruction bonds much shorter than those for ordinary government bonds, the sources said.
It also plans to limit the use of the proceeds from the bonds to such reconstruction projects as building infrastructure like roads and ports and supporting small and midsize businesses.
The government would ensure transparency of flows of the funds by separating them from other budgets, the sources said.
Introducing a reconstruction tax was proposed at the first meeting on Thursday of the government's reconstruction panel, chaired by Makoto Iokibe, president of the National Defense Academy of Japan.
The government is considering raising the consumption tax or income tax as the reconstruction tax. A one-percentage point hike in the consumption tax rate would push up revenue by some 2.5 trillion yen a year, while a 10-point hike in the income tax rates would lead to additional revenue of one trillion yen.
The tax hike would be determined after fiscal 2012 based on the economic situation.
