Perilous Times
PM warns Japan headed for Greece-like monetary melt down
* From correspondents in Tokyo
* From: AFP
* June 11, 2010 3:43PM
JAPAN'S new Prime Minister Naoto Kan has pledged a fiscal policy
overhaul to reduce the country's massive public debt mountain, warning
of a Greece-style meltdown.
"Our country's outstanding public debt is huge,'' the centre-left
leader said in his first policy address since taking office Tuesday.
"Our public finances have become the worst of any developed country.''
After decades of stimulus spending and feeble tax receipts, Japan's
public debt is now nearly double its gross domestic product, forcing
governments to issue ever more bonds to pay for their hefty outlays.
"It is difficult to continue our fiscal policies by heavily relying on
the issuance of government bonds,'' said Mr Kan, the former finance
minister.
"Like the confusion in the eurozone triggered by Greece, there is a
risk of collapse if we leave the increase of the public debt untouched
and then lose the trust of the bond markets.''
Mr Kan has in the past advocated increasing Japan's sales tax, although
he has not specified plans that may prove unpopular with voters ahead
of upper house elections planned for July 11.
"It is unavoidable to launch a full reform of the tax system,'' he
said, also calling for a bipartisan debate on fiscal reform.
"If we maintain the current level of issuance of new bonds, outstanding
debt will surpass 200 per cent of GDP in a few years,'' he said.
Pledging to revitalise the world's second biggest economy after its
long stagnation, Mr Kan said: "The duty my cabinet must meet is to
break the standstill that has lasted for nearly 20 years and create a
vigorous Japan.''
He targeted average real GDP growth of two per cent a year until 2020.