Prime Minister Yoshihiko Noda's Cabinet on Friday approved a 12.1 trillion yen ($158 billion) extra budget to help fund the reconstruction of Japan's tsunami-battered northeast.
The supplementary budget for the year through March approved Friday also earmarks about 2 trillion yen in measures aimed at easing pressure from the yen's recent surge, which erodes exporters' earnings.
"This (budget) will become a great source of energy or an engine for reconstruction," Finance Minister Jun Azumi told reporters after the Cabinet approval, according to Kyodo News agency.
Currency levels have exacerbated Japan's woes lately, with Noda openly worrying that it could lead to a hollowing out of Japanese industry. Major manufacturers including Panasonic Corp. and Nissan Motor Co. have already announced plans to shift some production overseas to protect themselves from foreign exchange risks.
The government hopes the new measures will prevent a broader exodus. It also is encouraging companies to embrace the advantages of a stronger yen by offering support to acquire companies and natural resources outside of Japan.
The package ranks second in size to the supplementary budget crafted to offset Japan's fiscal pain from the Lehman Brothers collapse. Extra budgets of 4 trillion yen and 2 trillion yen were already created this year for disaster reconstruction.
The latest budget includes 1.47 trillion yen for public works projects, 671.6 billion yen for small and medium-size businesses affected by the disaster and 355.8 billion yen for cleanup and other costs related to the Fukushima nuclear plant accident.
The government is planning to sell special reconstruction bonds to raise the bulk of the funds.
The budget bill is subject to approval in parliament.
The March 11 earthquake and tsunami left about 20,000 people dead or missing and devastated much of Japan's northeast coast. It is estimated to be the most expensive natural disaster ever.