TOKYO, Nov 7: Japan’s government on Wednesday approved a draft $25 billion extra budget aimed at fighting record high unemployment and speeding up a painful reform plan as its economy falters.

This supplementary budget is part of our efforts to implement an advanced (restructuring) programme, said a government official.

The nominal $24.75 billion package is much smaller than previous pump-priming measures, reflecting Tokyo’s commitment to cap fiscal expenditure and plug funds to pork barrel public works projects — a chief beneficiary of prior extra spending, he said.

The draft was okayed by Prime Minister Junichiro Koizumi and other ministers at a cabinet meeting and will be submitted to parliament Friday for final approval by as early as next week.

Koizumi demanded an extra budget after data showed gross domestic product (GDP) for April-June shrank 3.2 per cent on an annualised basis.

But ruling coalition lawmakers and some cabinet members are openly demanding a bigger package, saying the weak economy needs more financial support to avoid a deep recession and stem job losses.

The government insists three trillion yen is sufficient for now.

I want to discuss the economic problem when we submit the next fiscal year’s budget to the parliament in early December but I don’t have any idea of compiling a controversial second supplementary budget, Finance Minister Masajuro Shiokawa told reporters after the cabinet meeting.

Under the draft extra budget, one trillion yen will be spent on employment measures such as benefits for those without jobs funding for smaller enterprises and advancing a structural reform plan advocated by Koizumi, which involves promoting certain industries like technology and science.

Around 50 trillion yen will pay for emergency terrorist measures in response to the September 11 attacks in the United States, while 26.5 billion will go to tackling a mad-cow scare that hit Japan in September after the discovery of Asia’s first case of the brain-wasting disease at a farm just outside Tokyo.

The remaining two trillion yen will be spent on administrative and other matters.

New government bond issues worth 1.32 trillion yen will help fund the extra budget, taking total bond issuance in the year to March 2002 up to 30 trillion yen a cap pledged by Koizumi as a part of his reform plan in a bid to rein in Japan’s exploding debt.

The remainder of the budget will be covered by a drop in previous government expenses — amounting to 1.16 trillion yen — helped mainly by the nation’s ultra low interest rates, the official explained.

The extra spending this year will push national debt, including that held by local governments, to 666 trillion yen by March 2002 from 642 trillion yen last year, well over 130 per cent of GDP and the highest ratio of all industrialised nations.

In recent years the level of extra fiscal spending by Tokyo has swung from between four and 12 trillion yen and the world’s second largest economy wallows in a decade long slump.

When it submits the extra budget to parliament Friday, Tokyo is due to issue a revised GDP forecast for the year to March which is widely expected to see recession for the first time in three years from 1.7 per cent growth predicted earlier.—AFP