Japan's government is planning to suspend some state spending as it could run out of cash by October, with a deficit financing bill blocked by opposition parties trying to force Prime Minister Yoshihiko Noda into an early election.
The impasse in Japan's parliament has raised fears among investors that the world's third largest economy is being driven towards a "fiscal cliff", Reuters reported.
"The government running out of money is not a story made up. It's a real threat," Finance Minister Jun Azumi told a news conference, making a last-ditch appeal for cooperation by opposition parties to pass the bill.
"Failing to pass the bill will give markets the impression that Japan's fiscal management rests on shaky ground," he said.
Unless the bill clears the current parliamentary session that ends next week, the government will start suspending or reducing some state spending to avoid running out of money for as long as possible, the finance ministry said.
Noda's ruling Democratic Party passed the deficit-financing bill through the lower house on Tuesday. But the opposition boycotted the vote, signalling the bill has little chance of clearing the opposition-controlled upper house.
Subsidies to local governments and state-run universities will be cut by half from the originally planned amount until the bill passes parliament, the finance ministry said.