Asia-Pacific

Japan vows fiscal reform

(Agencies)
Updated: 2011-01-28 16:34

TOKYO - Japan's prime minister vowed on Friday to push ahead with tax reforms to curb bulging public debt, but an uncooperative opposition and divisions within his own party on policy make the chances of success slim.

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Rating agency Standard and Poor's cut Japan's long-term debt rating on Thursday for the first time since 2002. The International Monetary Fund too had harsh words for Japan, saying it needed to act urgently to cut its deficit.

Prime Minister Naoto Kan has made tax and social security reform, including a future rise in the 5 percent sales tax, a priority given the rising costs of Japan's fast-ageing society and a public debt that is the biggest among advanced nations.

"The important thing is to maintain fiscal discipline and ensure market confidence in Japan's public finances," Kan, who took over in June as Japan's fifth premier since 2006, told parliament's upper house.

Kan needs help from opposition parties that control the upper house not only for broad reforms, but to enact bills to implement a record $1 trillion budget for the year from April, in which borrowing outstrips tax revenues for a second straight year.

But with his voter support sagging at around 30 percent, opposition parties have shown little inclination to compromise -- something S&P highlighted when explaining its reasons for the downgrade.  

Kan's finance minister echoed his stance, saying the government must show its commitment to fiscal discipline. Deputy Chief Cabinet Secretary Hirohisa Fujii said the government would take S&P's criticism to heart.

"The Japanese government must humbly take the rating by a leading world ratings agency and further deepen its awareness of the importance of restoring fiscal health," Fujii, a former finance minister, told a news conference.