Japan to expand budget reserves for FY24, 25 for earthquake aid

Budget for relief: Japan plans to expand its budget reserves for the 2024-2025 fiscal in order to support recovery from the Noto peninsula earthquake.

The country’s Minister of Finance Shunichi Suzuki announced the expansion on Tuesday.

The cabinet had earlier in the day approved 4.74 billion yen in spending from fiscal 2023/24 reserves for water, food, diapers and heaters, and other such aids, Suzuki added. 

The reserves usage allows for a faster, more "realistic" response in contrast to compiling an extra budget, he said during a press conference.

His comments indicate the possibility of further expenditure from reserves as damage from the temblor becomes clearer.

The magnitude 7.6 earthquake on New year’s Day that hit Noto in Ishikawa prefecture on Japan's west coast claimed 180 lives at least.

The event is the deadliest since the 2016 quake in Kumamoto on the southern island of Kyushu.

Changes to the budget plan for 2024-25 will be submitted to the regular session of Japanese parliament starting later in January. 

The government had approved a total budget of 112 trillion yen ($780 billion) just 10 days before the quake, including 500 billion yen for general reserves and another 1 trillion yen in reserves for inflation countermeasures.

Suzuki did not comment on the size of the addition to reserves, or how it will be financed.

He only said the government is still examining the fiscal needs of quake-hit areas. 

Local media outlets including the Nikkei and Yomiuri have reported the expansion will be funded by more government bond issuance.

Suzuki said he cancelled a trip to Cambodia slated for Tuesday to focus on disaster response. He will nevertheless visit Sri Lanka on January 11 for a two-day visit until the 12th of this month.

Japan has urged Sri Lanka and its creditor nations to sign a Memorandum of Understanding on the island-nation's debt restructuring, which follows an agreement reached in principle late last year.

(With Reuters Inputs)