BBC News

Japan approves $157bn quake budget for reconstruction

image captionThe earthquake and tsunami caused widespread damage to Japan's infrastructure

Japan's government has approved a 12.1tn yen ($157bn; £100bn) budget for the reconstruction of areas devastated by the earthquake and tsunami.

The extra budget is the latest effort by authorities to stimulate growth in the Japanese economy, which is currently in recession.

A part of the budget will also be used towards measures to help businesses counter the rising yen.

The budget will be presented to parliament next week.

This is the third extra budget introduced by the government this year after taking the size of the overall budget to a record 106.4tn yen.

Delayed implementation

The proposal is the second-biggest extra budget ever approved by the Japanese government.

It comes after a 4tn yen supplementary budget in May and a 2tn yen special budget in July.

However, analysts said that although the government had been quick in sanctioning extra money, its impact had yet to be noticed.

"So far, we haven't seen any strong evidence of increase in public works projects," Takuji Okubo of Societe Generale told the BBC.

Mr Okubo added that the delay in implementation of plans was due to a lack of political will.

"Former prime minister Naoto Kan lingered on in his position and wasted precious time just pondering what to do with the money," he said.

Yen trouble

The government said it will use almost 2tn yen from the extra budget to implement measures to keep the yen's price in check.

The move comes amid concerns over the long-term future of the manufacturing sector in the country as the Japanese currency continues to strengthen, despite recent efforts by the authorities to stem its rise.

Global economic uncertainty has seen investors flock to the yen, traditionally seen as a safe asset, sending the currency to record highs against the US dollar.

It was trading close to 76.78 yen against a US dollar in Asia trade on Friday.

A strong currency hurts Japanese exporters by not only making their goods more expensive but also denting their profits.

According to a recent survey by the government, 46% of big Japanese manufacturers said they would consider shifting their production oversees if the yen remained as high as current level for six months.

Any such moves by the big exporters could have a big impact on the country's economic growth.

More on this story

  • Japan extends its post-quake loan scheme by six months

  • Japanese manufacturers 'more optimistic'