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Japan to spend about 1 trillion yen on public works for stimulus: sources

Japan's Prime Minister Shinzo Abe arrives the Lower House plenary session at the parliament in Tokyo November 26, 2013. REUTERS/Toru Hanai
Japan's Prime Minister Shinzo Abe arrives the Lower House plenary session at the parliament in Tokyo November 26, 2013. REUTERS/Toru Hanai

TOKYO (Reuters) - Japan will spend around 1 trillion yen ($9.86 billion) on public works in a stimulus package to be finalized next month, sources said, to help offset the impact of an increase in the sales tax.

Prime Minister Shinzo Abe's cabinet is expected to approve the stimulus package, which will total around 5 trillion yen, on December 5.

The government plans to raise the sales tax in April to 8 percent from 5 percent currently to pay for growing healthcare spending.

Abe wants to use short-term stimulus spending to counter the blow to consumer spending from the tax hike.

The package is likely to contain around 200 billion yen for a temporary expansion of payments to families with children, sources with direct knowledge of the matter said.

The package will also spend about 300 billion yen on payouts to low-income earners and around 150 billion yen on subsidies for new home purchases, sources said.

Japan's government has previously said that it will fund the stimulus package with budget reserves and higher-than-expected tax revenue so it does not have to issue new bonds.

Japan's debt burden is the worst in the world at more than twice the size of its $5 trillion economy, but the government has taken only minor steps to curb public spending. ($1 = 101.4000 Japanese yen)

(Reporting by Yuko Yoshikawa; Writing by Stanley White)

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