New postquake rebuilding policy skips tax-hike specifics

The government's Reconstruction Headquarters on July 29 unveiled what Prime Minister Naoto Kan called a "grand picture" for recovery that would spend roughly 19 trillion yen ($247 billion) in its first five years for intensive rebuilding in the wake of the Great East Japan Earthquake. The full 10-year, 23 trillion yen basic plan lacked specifics on funding and stated only that the money will come from temporary tax hikes, mostly on major revenue sources, and spending cuts. It did not spell out details of the scale and duration of the tax hikes. Unusually for a policy of this importance, no Cabinet meeting was held to approve. "(The basic plan) lays down a grand picture of policies toward full-scale reconstruction," Kan told a news conference July 29. "We will issue reconstruction bonds and secure, with responsibility, the fiscal resources for their repayment. We will accelerate rebuilding efforts, including the drafting of a third supplementary budget." An earlier final draft of the basic policy, released to the DPJ before July 29, included the following: (1) Reconstruction bonds will be issued by the end of fiscal 2011 to finance rebuilding efforts; (2) Temporary tax hikes will account for about 10 trillion yen required to repay the reconstruction bonds; (3) Additional fixed-rate tax hikes will be considered, mostly on major revenue sources such as income tax and corporate tax; and (4) Tax hikes will only be in force for five years in principle, but possibly up to 10 years. The document formally endorsed on July 29 contained few concrete figures, other than the amount of reconstruction bonds to be issued. Decisions were postponed to September, when a third supplementary budget will be compiled. So far, 6 trillion yen was been earmarked for reconstruction in this fiscal year's first and second supplementary budgets. For the next 13 trillion yen, the basic policy only said that it "will be financed by spending cuts, sales of state-owned properties, review of special accounts and personnel costs for public servants, securing of additional nontax revenues and limited-duration tax measures," without specifics. Concerning repayment of the reconstruction bonds, the document said only that it would be "under further consideration based on the (five-year) intensive reconstruction period and the (10-year) reconstruction period." The basic policy also outlines special reconstruction zones that will grant exemption from certain regulations for institutions and give subsidies to local governments that may be used more freely. The policy aims for "disaster mitigation," or minimizing the damage from the tsunami and other causes. It urges communities to relocate to higher ground and create emergency evacuation buildings and evacuation routes. Criticism of the prime minister for continuing to lead reconstruction efforts despite earlier promising to step down continues to be heard both within the DPJ and opposition.