TOKYO (MNI) – The ruling Democratic Party of Japan plans to submit
to the Diet a stopgap bill next week, as the government faces a
stumbling block in winning approval of spending bills in the fiscal 2011
budget in the hung parliament, according to local media.

The bill now under consideration by the ruling DPJ will cover 107
items, including corporate tax breaks for small businesses, reduced
registration and license duties for homebuyers, and duty-free allowances
on alcohol and tobacco, the Nikkei reported on Thursday, without citing
sources.

Opposition New Komeito and the Social Democratic Party, which voted
against the fiscal 2011 budget, have decided to back the stopgap bill,
according to the business daily.

The Yomiuri Shimbun newspaper said the main opposition Liberal
Democratic Party is also considering supporting the bill.

Even if the upper house rejects or fails to discuss the budget
within 30 days of its approval by the lower house, it is expected to
take effect by the April 1 start of the next fiscal year as the lower
house decision overrides that of the upper house.

But prospects for the passage of key budget-related bills,
including those which enable the issuance of deficit-financing bonds,
remain bleak, because they need approval in both chambers.

Without the proposed stop-gap bill, 40% of the fiscal 2011 budget
will remain unfunded.

Under the original budget proposal, Japan was supposed to issue
deficit-financing bonds worth Y38.2 trillion to finance part of the
fiscal 2011 budget, totalling Y92.4 trillion.

The House of Representatives last week approved the main fiscal
2011 budget, which is now being debated in the opposition-controlled
House of Councillors, or upper house.

Prime Minister Naoto Kan, who is struggling with tumbling public
support, faces opposition party demand that he resolve the lower house
and call a snap election. He is also confronted by a revolt from within
the ruling party.

Last week lawmaker Yuko Sato quit the DPJ to join a small party led
by Nagoya Mayor Takashi Kawamura, an outspoken former DPJ lawmaker.

Sixteen lower house members, who support the former party leader
Ichiro Ozawa, left the DPJ’s parliamentary caucus last month.

In an another blow to the Kan cabinet, Foreign Minister Seiji
Maehara resigned this week on an alleged violation of the political fund
law.

Maehara told reporters that he had received a total of Y250,000
from a South Korean national who is a permanent resident of Japan.

Japanese law prohibits contributions from “foreign” individuals or
entities but this incident also reflects Japan’s war-time colonial rule
of the Korean peninsula. Koreans who had been brought to Japan lost
their Japanese citizenship after World War Two and their descendents
have also been denied citizenship.

The Korean woman who had made political contributions to Maehara’s
office told the Asahi Shimbun daily that she had known Maehara since he
was in school and thus wanted to support him. She also said she didn’t
know that a political donation by permanent Korean residents in Japan
to Japanese politicians was illegal.

Maehara, who once led the Democratic Party of Japan when it was in
the opposition, was considered to be a top candidate to succeed Kan.

Even if short-term funding for the 2011 budget is secured, there
remain concerns about Japan’s long-term fiscal health.

Standard & Poor’s in January cut Japan’s sovereign debt rating to
AA-, the fourth-highest level, citing the DPJ’s lack of “coherent
strategy” in dealing with a debt approaching 200% of gross domestic
product.

Moody’s Investors Service said last month that it had lowered the
outlook on Japan’s Aa2 sovereign debt rating to negative from stable,
citing the surging public deficit and slow policy response.

tokyo@marketnews.com
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