28/03 Massive reconstruction aid to cover local govt costs

The Yomiuri Shimbun

The central government will shoulder almost all expenses involved in rebuilding public facilities in municipalities devastated by the March 11 earthquake and subsequent tsunami, it was learned Saturday.

The government plans to help affected municipalities recover from the disasters as quickly as possible by ensuring they are burdened with virtually no reconstruction costs, sources said.

The government support will be unprecedented in scale, surpassing that provided after the Great Hanshin Earthquake in 1995.

The government has declared the events of March 11 a large-scale disaster. By law, in cases of large-scale disasters, the nation bears nearly 90 percent of the cost of restoration work such as the reconstruction of roads and ports.

The government also plans to raise subsidies to help restore up to around 80 percent of public hospitals and water supply systems, assistance that is not required by the law in question.

In addition, local governments can issue bonds to cover the costs of disaster reconstruction projects. When the bonds are redeemed at maturity, the central government will shoulder 95 percent of the money to be returned to purchasers by granting an equal amount as tax allocations to the local governments. This means local governments only need to pay 1 percent to 2 percent of the total expenses for their reconstruction.

The central government also is discussing increasing the amount of tax allocated to local governments for special situations such as disasters by more than 50 billion yen. The fiscal 2011 budget already contains 1 trillion yen earmarked for this purpose.

Some sources estimate the increased amount ultimately may reach 100 billion yen.

At the time of the 1995 Hanshin earthquake, the government raised the tax allocated to local governments for special situations by 30 billion yen.

The central government is discussing other options to ease the burden on local governments, such as increasing the amount of tax allocated to them to pay for reconstruction projects.

(Mar. 28, 2011)