The emergency budget of 4 trillion yen ($48.5 billion), which is likely be followed by more reconstruction spending packages, is still dwarfed by the overall cost of damages caused by the March 11 earthquake and tsunami, estimated at $300 billion.

"With this budget, we are taking one step forward toward reconstruction ... and toward restarting the economy," Finance Minister Yoshihiko Noda told reporters after a cabinet meeting.

Prime Minister Naoto Kan, under fire for his handling of the crisis, said Japan would have to issue fresh government bonds to fund extra budgets to come, and suggested he would stay on to oversee the process.

"I feel it was my destiny to be prime minister when the disasters and nuclear accident took place," Kan told a news conference.

Reuters