* Tokyo aims to craft first extra budget this month
* Ministers wary of adding more to Japan's debt pile
* Ruling party sec-gen signals more bond issuance (Adds quotes, details)
By Tetsushi Kajimoto
TOKYO, April 7 (Reuters) - Japan is set to form an initial supplementary budget worth a bigger-than-expected 4 trillion yen (${esc.dollar}47 billion) for relief efforts after last month's earthquake and tsunami devastated the country's northeast.
The government is aiming to compile its first emergency budget by the end of this month, National Strategy Minister Koichiro Gemba told lawmakers.
It will focus on removing debris, building temporary housing and restoring infrastructure such as schools and providing financial support.
"It has been rumoured that adding these measures would amount to 1-2 trillion yen, but it requires far more than that and I expect it to be close to 4 trillion yen," Gemba said.
Japan is facing its worst crisis since World War Two after a 9.0 magnitude earthquake and a tsunami towering more than 10 metres battered its northeast coast, leaving nearly 28,000 dead or missing and rocking the world's third-largest economy.
The government estimates the material damage alone could top ${esc.dollar}300 billion, making it by far the world's costliest natural disaster.
DEBT ISSUANCE
Cabinet ministers, including the finance minister, have said that Japan, which has a public debt that is already twice the size of its ${esc.dollar}5 trillion economy, should avoid new bond issuance to help finance the initial extra budget.
But Katsuya Okada, the secretary general of the ruling Democratic Party, while echoing the need to avoid government bond issuance, also left open the possibility of using infrastructure-related bonds.
"Even if bonds were to be issued, I think the basis of the debate would be to issue construction bonds and to avoid debt bonds," he told reporters.
The government aims to compile two or more emergency budgets from April and is seeking to cut spending and tap emergency reserve funds first to fund disaster relief.
"We must come up with some good ideas if these measures are not enough," Gemba said, underlining a struggle to secure enough funds to cover potential costs.
The Democrats also faces the tough task of securing support from opposition parties in a split parliament so as to smoothly implement emergency spending and deliver support to the quake-stricken areas without delay.
Japanese media have said the government was likely to avoid more borrowing to fund the initial extra budget, in a sign that authorities are wary of alarming bond investors by adding too much to Japan's huge debt, although further budgets could do so.
Deputy Finance Minister Mitsuru Sakurai last week signalled that Japan may eventually need to spend more than 10 trillion yen on emergency budgets, a view largely in line with analysts, with a portion possibly covered by new taxes.
Markets are keeping a close eye on how much more the government will borrow to fund disaster relief costs, although Japan does not face a Greece-style debt crisis because its public debt is held almost entirely by domestic investors. (${esc.dollar}1 = 85.475 Japanese Yen) (Additional reporting by Yoko Kubota, Kiyoshi Takenaka and Chisa Fujioka; Editing by Edwina Gibbs and Joseph Radford)
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