05/04 Govt to provide financial help

The Yomiuri Shimbun

The government plans to give as much financial support and compensation as possible to residents, farmers and companies that suffered damage from the March 11 Great East Japan Earthquake, but it remains unknown where it will find the money.

Given the unprecedented damage caused by the earthquake, tsunami and accidents at a nuclear power plant, a wide range of people and companies are sure to need financial help.

With more than 160,000 disaster victims living in evacuation shelters, the government is scrambling to construct temporary housing and make efficient use of public housing and private rented accommodations.

It set a target of constructing 30,000 temporary housing units in two months. But Internal Affairs and Communications Minister Yoshihiro Katayama said on an NHK TV program Sunday: "That's far short of the need. We want manufacturers to step up production."

When the Great Hanshin Earthquake occurred in 1995, 48,000 temporary housing units were built. But in the latest disaster, the need for temporary housing is certain to far exceed that after the 1995 quake. Another problem is how to secure land for the housing.

The Disaster Relief Law stipulates that people whose dwellings are destroyed in a disaster are entitled to live in temporary housing.

However, the government is likely to provide temporary housing even for residents in Fukushima Prefecture who evacuated or are staying indoors following the accident at Tokyo Electric Power Co.'s Fukushima No. 1 nuclear power plant. The Health, Labor and Welfare Ministry and the Fukushima prefectural government have been discussing this issue, sources said.

About 44,000 public housing units are currently available nationwide for the survivors of the disaster, who are entitled in principle to stay in the housing rent-free for about six months.

Prefectures that suffered damage in the disaster are considering renting private accommodations and providing them rent-free for their residents for a certain period.

The government's Federation of Housing and Community Centers provides information about public housing and private accommodations for victims of the disaster.

After the Great Hanshin Earthquake occurred, the government created the Disaster Victims Livelihood Recovery Support System under which up to 3 million yen is provided to each household.

But the government has only 54 billion yen left in the system, an amount internal affairs minister Katayama called "totally inadequate."

Therefore, the government plans to establish a new fund by special legislation and is considering raising its share of contributions to the fund from the current 50 percent it contributes to the Disaster Victims Livelihood Recovery Support System.

The government is to pay all the costs of removing collapsed houses and rubble, and is to give as much financial support as possible to the rehabilitation of towns.

"I want to work out a reconstruction plan to create a splendid Tohoku region and a splendid Japan that goes beyond merely restoring the previous conditions," Prime Minister Naoto Kan said at a press conference Friday.

Kan said part of the plan is to move residential areas along the coastal regions hit by the tsunami to hillsides and to construct fishing ports and facilities to process marine products in waterfront areas.

The government is also considering raising its current 50 percent share of contributions to the fund for mass evacuation of residents, and purchasing vacant lots after they evacuate, according to the sources.

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Govt to introduce tax break

The government also plans to introduce a tax break for the survivors of the disaster.

By applying the so-called casualty loss deduction system, the government will reduce the withholding tax for salaried workers. Under the casualty loss deduction system, taxpayers can claim tax deductions for damage to housing, furniture or stores.

The government is also taking steps to directly provide financing to companies affected by the disaster by improving the crisis response financing system set up after the Lehman shock in 2008. It will also relax requirements for bank loans to companies, the sources said.

It also is likely to seek a grace period for mortgage payments so survivors will not be burdened with paying for two housing loans--for the house destroyed in the disaster and for the house to be built afterward.

The government plans to submit a set of special bills to the Diet by the end of April to implement its financial relief measures, the sources said.

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Deficit bonds may be needed

The government plans to compile several supplementary budgets for fiscal 2011 to finance reconstruction work and compensation for victims of the March 11 disaster, but the nation's difficult fiscal situation may force the government to issue deficit bonds to secure the necessary funds.

According to the Cabinet Office's estimation, the earthquake and subsequent tsunami caused between 16 trillion yen and 25 trillion yen in damage to social infrastructure, including houses, factories and roads. This is far more than the 10 trillion yen in damage inflicted by the Great Hanshin Earthquake.

After the Hanshin quake, the government compiled three supplementary budgets totaling 3.2 trillion yen.

"The funds needed [to deal with the aftermath of the March 11 earthquake] will exceed 10 trillion yen in the fiscal 2011 supplementary budgets alone," said Hidenori Suezawa of SMBC Nikko Securities Inc.

The first supplementary budget is expected to be around 2 trillion yen, according to a senior Democratic Party of Japan official. The money will mainly be allocated for the removal of debris and supporting the livelihoods of evacuees, and will be taken from such sources as reserve funds in the fiscal 2011 budget (1.16 trillion yen) and 5 percent of public works spending (about 300 billion yen).

Funding based on the DPJ manifesto--such as additional spending for child-rearing allowances (208.5 billion yen) and a toll-free expressway project (120 billion yen)--will also be allocated to restoration.

However, deficit bonds may have to be issued to secure revenues for the second and third supplementary budgets needed for full-fledged restoration.

Some DPJ members have proposed creating a special tax for rehabilitation and reconstruction, which would involve raising the rates of corporate, consumption and income taxes.

The government and ruling parties must fully explain to the public the necessity of issuing deficit bonds and raising taxes as temporary measures for restoration.

(Apr. 5, 2011)