* The Japanese large public debt is obstacle to the reconstruction of spending
* Packages more spending to follow, new debt and tax hikes in the framework
* To consider the Japan not now facing a Greece-style debt crisis but concerns
* Lobby business calls for budgetary discipline, monetary easing (adds business Hall proposals)
By Tetsushi Kajimoto
(TOKYO, April 22, Reuters) - the Japanese Government approved a budget for emergency of 4 billion yen (50 billion dollars) for the Friday disaster relief without resorting to new loans, but it is preparing them for more heavy reconstructionmore later this year spending will require a new bond issue and, eventually, to increase taxes.
Enormous funds needed for reconstruction after the March 11 earthquake and the tsunami, which left nearly 28,000 dead or missing and triggered a nuclear crisis, but the Japan has already public debt already double the size of its economy of $ 5 trillionthe worst among industrialized.
"With this budget, we let one step towards reconstruction after the earthquake, the Tohoku and to restart the economy" Finance Minister Yoshihiko Noda told journalists after a cabinet meeting.
"It is significant that we have compiled on a budget of 4 billion yen without issue of new bonds of the Government (of Japanese Government bonds). "It was quite difficult to reduce the amount of 4 billion yen, but we worked it."
Tokyo believes that material damage alone could top 300 billion dollars in more expensive natural disaster in the world, while analysts and some to the Interior of the Government led by the Democratic Party suggested that Japan might need to spend more than 10 billion yen.
The second supplementary budget should be compiled by the autumn at the latest, Katsuya Okada, Secretary General of the Democratic Party, said Thursday.
THESE INCREASES
The Government plans to increase taxes, including sales tax unpopular to fund reconstruction, but there is still a lack of consensus on the politically sensitive issue.
"If the Government can take this opportunity to change the social welfare and tax system, it could be a turning point rather than a point of no return," said Naomi Hasegawa, senior income securities strategist fixed to Mitsubishi UFJ Morgan Stanley securities.
"Investors want reassuring that the reconstruction of expenses will be supported by an increase in sales tax", she says, adding that a 3 percentage point hike would generate 7.5 billion yen in additional revenue each year.
JGBS acquired after the Government held its promise not to issue new bonds to finance the first emergency budget, helping to push the performance of 10 years to a minimum of four weeks.
The market players remained nonetheless cautious because the issuance of debt more in the future will need to pay for reconstruction, although the Japan does not now run a Greece-style debt since its public debt crisis is almost entirely held by domestic investors.
Emphasis on the concerns of investors, largest business lobby of Japan has urged the Government to ensure that the market is confident in its budgetary discipline, while the funds for reconstruction are wanted.
"Given the serious budgetary situation of the Japan, attention needs to be paid to the sovereign fluctuation risks and prices of government bonds," he said in a statement.
Nippon Keidanren called for the Central Bank to implement the monetary easing steps more such as stimulate its system for the purchase of goods, stressing that financial markets should remain stable as companies were that it is difficult to issue capital to business.
The cabinet plans to submit the emergency budget--which includes approximately 1.6 billion yen of spending for infrastructure - to the Parliament on 28 April. Noda, said that he hoped that it would be adopted as soon as possible.
The actual size of the supplementary budget is only 305.1 billion yen, with most of the 4.0153 billion yen to military expenditures to be financed by spending cuts in foreign aid and places paid to families with children and other existing programs.
The Government also draws reserves for pension payments - regarded as a sacred cow in a rapidly aging society where each retired will be supported by less than two workers by 2030, and the opposition objected to this approach.
Friday he planned to explain early next month, Japanese Prime Minister Naoto Kan said how Tokyo should lead the economy and reconstruction after the disasters of last month. (Yen Japanese $1 = 82.465) (Other reports by Stanley White;) (Editing by Edmund Klamann and Edwina Gibbs)
