Japan's lower house yesterday passed a crucial deficit-financing bond bill that will allow Tokyo to pay for a huge chunk of this year's public spending, and avoid its own "fiscal cliff".
The bill, which was expected to win approval in the opposition-controlled upper house of parliament on Friday, was a key condition for Prime Minister Yoshihiko Noda agreeing to call the elections demanded by the opposition.
Noda had warned that large parts of Japanese public life would grind to a halt unless the bill was approved, allowing Tokyo to issue new bonds that would cover about 40 percent of its budget spending in the year to March.
The opposition had refused to green light the bill until Noda gave a specific timeline for calling elections, which a senior ruling party lawmaker confirmed Wednesday would be held on Dec. 16.
Global markets have been jittery over a budgetary gridlock 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 Jan. 1.
Unless divided Democratic and Republican lawmakers agree on a new deal, the package would come into effect, possibly tipping the country back into recession and dealing a major blow to the global economy.
Tokyo has not been forced to halt budgetary spending due to a funding shortage since the end of World War II.
Noda had been under pressure after spending a lot of his political capital over the summer forcing through a bill on doubling the nation's sales tax — in part to begin closing Japan's yawning debt hole.
The country relies heavily on borrowing to finance its regular spending, creating an ever-worsening public debt problem.
The International Monetary Fund says Japan will owe the equivalent of 245 percent of its approximately $5 trillion gross domestic product next year, the highest among industrialized nations.