Japan cabinet approves 5.05 trillion yen extra budget

TOKYO (Reuters) - Japan's cabinet agreed on Friday to compile an extra budget worth 5.05 trillion yen ($61.33 billion) to bolster an economy struggling with persistent deflation and a rising yen.

The extra budget is larger than an initial proposal for 4.8 trillion yen as the ruling Democratic Party brought forward public works scheduled for the next fiscal year after a junior coalition party asked for bigger stimulus.

The cabinet's plan didn't mention a recommendation submitted on Wednesday to create a sovereign wealth fund, but it did say the government would look for more efficient ways to use currency reserves.

The government aims to draft the extra budget for the fiscal year to next March.

The extra budget offers more help to job seekers, expands support for people raising children, increases subsidies for home renovations that improve energy efficiency and promotes subsidies for solar panels.

The government says the measures will add 0.6 percentage point to gross domestic product growth, but analysts doubt that stimulus steps could have a significant impact on the economy, because Japan's debt burden is the worst among industrialized economies and limits the scope for public investment.

Prime Minister Naoto Kan's government faces the task of reining in massive public debt nearly twice the size of Japan's $5 trillion economy, while nurturing a fragile economic recovery.

The outlook for the stimulus measures is far from certain, since the government needs the support of opposition lawmakers to enact laws on implementing the budget, due to a split parliament.

(Reporting by Stanley White; Editing by Edmund Klamann)