RECONSTRUCTION IN JAPAN

JAPAN RECONSTRUCTION PANEL EYES BOOM IN AUTUMN

Kiyoshi Takenaka and Sumio Ito

Reuters, June 11, 2011

TOKYO (Reuters) - Spending to rebuild Japan's tsunami-hit northeast will spark an economic boom later this year, generating revenues that can be used to redeem reconstruction bonds and reduce the need to rely on long-term debt, the head of a government advisory panel said.

Makoto Iokibe, chairman of the Reconstruction Design Council, also called for a mass consolidation of ports along the coast to boost the fishing industry and aggressive investment to make the region a pioneer in renewable energy development.

The panel will deliver its first set of recommendations by the end of the month, setting the direction for the country's biggest rebuilding effort since the years after World War Two, estimated to cost up to 20 trillion yen ($250 billion).

"We should carry out the kind of reconstruction that helps the Tohoku (northeast) region emerge hopefully as a leader vibrant enough to drive the whole Japanese economy. That's our basic stance," Iokibe told Reuters in an interview.

Three months after the massive March 11 earthquake and tsunami hit, triggering the world's worst nuclear disaster in 25 years, the government is under fire for slow progress in coping.

Securing funds for the rebuilding effort is a major challenge for the government with public debt already twice the size of its $5 trillion economy and rating agencies threatening to downgrade its credit due to the cost of reconstruction.

"If the second supplementary budget is enacted in summer, full-blown construction activity starts in autumn, driving reconstruction-related demand," Iokibe said late on Friday.

"Politicians are leaning toward issuing bonds for reconstruction, but we should not just pass our debt on to future generations. Reconstruction bonds will lead to reconstruction-related demand and an economic boom. Then you can collect."

While Iokibe did not comment on specifics, the panel has in past meetings discussed income, corporate and sales taxes as candidates for hikes to pay back borrowing for reconstruction.

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