Japan PM warns 'risk of collapse'

JAPAN: Japan's new on Friday 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 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." 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 percent of GDP in a few years," he said.

Pledging to revitalise the world's second biggest economy after its long stagnation, 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." TOKYO, Friday, AFP