Japan PM renews calls for fiscal reform talks

Wednesday, 26 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

TOKYO (Reuters): Japan’s Prime Minister, facing a divided parliament and doubts over his political survival, on Monday stepped up his campaign for a sales tax rise he argues is vital to pay for huge welfare costs in the fast-ageing society.

Prime Minister Naoto Kan’s key economic ministers, also speaking to the opening session of parliament, promised on their part to impose fiscal discipline, as the government presses ahead with a proposed budget from April with record spending of 92.4 trillion yen ($1 trillion).

Kan has made social security and tax reform his policy priorities and warned in his speech that he would have to ask the public to “bear the burden” to secure stable funding -- a reference to a future hike in the 5 percent sales tax.

His government has to try to tackle a public debt, already twice the size of the fragile $5 trillion economy, without damaging that economy which has slipped to third place globally, behind China and the United States.

But even the 2011/12 budget is far from secure. In order to pass bills needed to implement it, Kan must either cobble together a simple majority in the upper house with opposition help or build a two-thirds majority in the lower house to override the upper chamber.

“Limits are emerging to the securing of greater revenues for social security under only existing efforts,” he said in a prepared text of his speech to be delivered at the start of the regular parliament session.

“Every single lawmaker, in both the ruling and opposition parties, is responsible for responding to this major issue.” Kan said the cabinet would also present basic outlines for tax and welfare reform by June. But analysts said it was not certain he would be in office that long if opposition parties refused to budge on their position.