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Japan mulls 4th extra budget of 1-2 trillion yen: report

Japanese PM Noda arrives for an opening ceremony of the extraordinary session of parliament in Tokyo
Japanese PM Noda arrives for an opening ceremony of the extraordinary session of parliament in Tokyo

TOKYO (Reuters) - The Japanese government is considering compiling a fourth extra budget for the fiscal year to March of about 1 to 2 trillion yen ($13-26 billion) to fund additional economic steps without issuing new bonds, the Yomiuri newspaper reported on Wednesday.

The extra budget, which Prime Minister Yoshihiko Noda's government may start compiling as early as November, could provide funding for economic measures as concerns grow over a global economic slowdown and the euro zone debt crisis, the Yomiuri said without citing sources.

The budget, which may also include funding for rebuilding following a recent storm that hit western Japan, will be funded from extra money that was set aside for bond interest payments that turned out to be lower than expected, the Yomiuri said.

The government is currently working on a third extra budget, expected to be more than 10 trillion yen in size. It aims to submit a bill on this to the country's divided parliament in October.

Money from that budget will be used to fund projects to rebuild areas destroyed by a huge earthquake and tsunami in March and also include steps to combat the strong yen, which is clouding the outlook for Japan's export-oriented economy.

How to secure reconstruction funding is still under debate in Japan, saddled with a public debt twice the size of its $5 trillion economy.

Noda has said he first wants to cut wasteful spending and carry out expenditure and revenue reforms then hike taxes, but opinions vary in his ruling party. A government tax panel headed by Finance Minister Jun Azumi is planning to present various options soon.

The panel plans to drop the corporate tax rate by 5 percentage points to meet a ruling party pledge, before raising that tax by 4 percentage points for a limited period of three years to fund rebuilding, the Asahi newspaper reported.

The rest will be filled in by raising other taxes, mainly income tax, and the hike period will be for five to 15 years, the Asahi reported, without citing sources.

($1 = 76.880 Japanese Yen)

(Reporting by Yoko Kubota; Editing by Edwina Gibbs and Joseph Radford)

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