A woman reacts as she looks around a devastated area by March 11th's earthquake and tsunami in Natori
Japan's government proposed on Friday tax hikes worth around $146 billion (92 billion pounds) and selling stakes in a tobacco company and Tokyo's subway operator to help fund rebuilding from the devastating March 11 earthquake and tsunami.
The heavily indebted government faces a balancing act to secure funding for Japan's biggest rebuilding effort since the aftermath of World War Two without further straining its finances or choking off a frail economic recovery, reports Reuters.
Income, corporate and consumption tax increases were among the options a government tax panel said it had proposed. Rises in other taxes such as those on tobacco, alcohol and gasoline were also suggested as the government seeks to raise 11.2 trillion yen (92.5 billion pounds).
To limit the tax burden, Tokyo is seeking to sell stakes in Japan Tobacco Inc and unlisted Tokyo Metro to fund rebuilding in areas devastated by the magnitude 9.0 quake and tsunami that left about 20,000 people dead or missing and triggered the world's worst nuclear crisis since the 1986 accident at Chernobyl.
"It is by no means easy for politicians to ask the people to shoulder a tax burden," Finance Minister Jun Azumi told reporters earlier on Friday.
"Since we are determined not to pass the debt to the next generation after such an unprecedented disaster, we have no choice but to ask for some burden on individuals and companies."
The Cabinet Office estimates that the proposed tax hikes could knock as much as 0.24 percentage points off Japan's real GDP growth in the first year if they were implemented from the fiscal year that starts next April.
In outlining its proposals, the government presented three options for tax increases for debate among ruling party officials from next week, before compiling a third extra budget to fund the rebuilding of the disaster-hit northeast.
Tokyo has already passed two supplementary budgets worth a total of 6 trillion yen and plans to spend 13 trillion yen more over five years, with the bulk of the spending to be covered by the next budget due some time next month.
The government is considering funding most of the third budget, expected to be worth around 11 trillion yen, with reconstruction bonds, a source close to the matter told Reuters on Thursday.
Extra tax revenues would be used to redeem the maturing bonds over a period of up to 10 years, according to the proposals.
The larger-than-expected bond issuance would add to a debt pile that is already double the size of Japan's $5 trillion economy, although so far there have been no signs of strain in the Japanese government bond market, which is dominated by domestic investors.