The record ¥92.41 trillion budget for fiscal 2011 was enacted Tuesday. Although the opposition-controlled Upper House voted it down earlier in the day, it was enacted due to a constitutional provision that mandates that a Lower House vote on a national budget prevails over an Upper House vote. Even with the enactment of the budget the Kan administration faces many hurdles.

Diet divisions make the passage of budget-related bills — among them a bill to issue bonds to raise some ¥40 trillion — difficult. Hoping to gain the cooperation of the opposition forces in Diet deliberations, the Kan Cabinet decided to withdraw a bill to increase the child allowance — a key policy of the Democratic Party of Japan — from the current monthly ¥13,000 to ¥20,000, particularly for children under three. Instead, a stopgap bill to extend the current child allowance program for six months beyond March 31 was enacted Thursday with the help of the Japan Communist Party and the Social Democratic Party.

With the nation in the midst of a dire emergency caused by the March 11 massive earthquake and tsunami, both the ruling and opposition forces must work together for smooth execution of the initial fiscal 2011 budget and for the early passage of a supplementary budget for reconstruction of the region devastated by the disasters.

Prime Minister Naoto Kan hopes to craft an initial extra budget of more than ¥2 trillion to pay for reconstruction. The initial fiscal 2011 budget includes a contingency fund of ¥1.16 trillion. Since this fund is not enough to cover the planned extra budget, the government will need to raise funds by reducing spending on the DPJ’s key policies. The government and the DPJ should demonstrate sincerity in its talks with the opposition forces on this point. By doing so they may get the opposition’s cooperation in passing the budget-related bills.

The government will need additional supplementary budgets for reconstruction. It should not rule out an issuance of bonds for raising funds because tax increases in this situation are likely to depress the economy and further diminish tax revenues.

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