Japan eyes suspending state spending as money runs out

TOKYO: Japan's government laid out plans on Friday to suspend some
state spending as it could run out of cash by October, with a deficit
financing bill blocked by opposition parties trying to force Prime Minister Yoshihiko Noda into an early election.
The
impasse in Japan's parliament has raised fears among investors that the
world's world's third largest economy is being driven towards a "fiscal
cliff".
"The government running out of money is not a story made up. It's a real threat," Finance Minister Jun Azumi told a news conference, making a last-ditch appeal for cooperation by opposition parties to pass the bill.
"Failing to pass the bill will give markets the impression that Japan's fiscal management rests on shaky ground," he said.
Unless
the bill clears the current parliamentary session that ends next week,
the government will start suspending or reducing some state spending to
avoid running out of money for as long as possible, the finance
ministry said on Friday.
Noda's ruling Democratic Party passed
the deficit-financing bill through the lower house on Tuesday. But the
opposition boycotted the vote, signalling the bill has little chance of
clearing the opposition-controlled upper house.
Under the
proposed contingency for suspending some spending, the finance ministry
said government bond redemptions and interest payments on outstanding
debt would not be affected as they will be made in full using reserves
set aside for this purpose.
All state spending will be targeted,
except for those that will severely effect public livelihood such as
police, national security and disaster relief.
Subsidies to
local governments and state-run universities will be cut by half from
the originally planned amount until the bill passes parliament, the
finance ministry said.
The upper house has also passed a censure
motion against Noda, piling more pressure on him to make good on his
promise earlier this month to call an election to parliament's lower
house.
Several ruling party and opposition lawmakers have
suggested that Noda would probably wait out the stalemate until the
current parliament session ends on September 8 and call a snap vote
during an extra session in October to secure the deficit financing
bill's passage.
The term "fiscal cliff" is commonly associated
with around $500 billion (316 billion pounds) in expiring U.S. tax cuts
and spending cuts that could kick in automatically next year,
triggering a "significant recession", according to the Congressional
Budget Office. - Reuters