Japan passes crucial deficit-financing bond bill

 AP PHOTO/JUNJI KUROKAWA

TOKYO– Japanese lawmakers on Friday passed a crucial deficit-financing bond bill that will allow Tokyo to pay for a huge chunk of this year’s public spending, avoiding the country’s own “fiscal cliff”.

The bill was a key condition for Prime Minister Yoshihiko Noda calling elections, now set for December 16, after he warned large parts of Japanese public life would grind to a halt unless the bill won parliamentary approval.

The opposition controlled-upper house of parliament passed the bill with 197 votes in favour against 40 opposed in its Friday session, following approval in the lower house on Thursday.

Opposition lawmakers had refused to green light the bill until Noda gave a specific timeline for calling elections.

The bonds are crucial to raising funds to pay for about 40 percent of government spending in the year to March.

Tokyo relies heavily on borrowing to finance its spending and had been facing a cash squeeze due to political deadlock over the bond bill.

Global markets have been jittery over a budgetary snarl up in Washington that threatens to take the economy over a so-called fiscal cliff, a combination of deep spending cuts and tax hikes that takes effect on January 1.

Unless divided Democratic and Republican lawmakers agree on a new deal, the package will come into effect and likely tip the country back into recession, dealing a major blow to the global economy.