The cabinet of Prime Minister Yukio Hatoyama has laid out guidelines for an extra budget to be implemented during fiscal 2009, Finance Minister Hirohisa Fujii said on Tuesday.
The ruling Democratic Party of Japan (DPJ) also says it will attempt to keep the nation's debt below 44 trillion yen (494 billion U.S. dollars), which may mean that the party has to scale back some of its social welfare spending plans.
In its manifesto, the DPJ pledged to eliminate wasteful spending, and instead focus on giving money to households and families. But since it came to power, that task has proved difficult.
The extra budget will look to prevent Japan from going into a second recession in a year, as stimulus measures put in place by the previous
government of the Liberal Democratic Party (LDP) seem to be wearing off. Statistics released earlier on Tuesday showed the tertiary sector
posted a 0.5 percent decline in activity, and figures on Monday showed that despite growth in gross domestic product, the domestic demand deflator, which measures demand for domestic goods and is an indicator of deflation, had shrunk by 2.6 percentits biggest drop in more than half a century.
Problems have been exacerbated for the government as it has emerged that tax revenues are likely to bring in less that 40 trillion yen -- some 6 trillion yen less than expected -- meaning that opting to increase the nation's already huge debt is looking more likely.
The government did not give the size of the extra budget or set a date for its implementation, but said it was launching a new team to be led by
Deputy Prime Minister and State Minister for National Strategy, Economic and Fiscal Policy Naoto Kan to decide on its specifics.
The DPJ is currently performing a balancing act as it tries to reduce with budget requests for 2010 that reached a record 95 trillion yen,
attempts to move forward on campaign promises to increase social spending and looks to keep the economy in shape amid dour conditions worldwide.