TOKYO — Japan's Prime Minister Naoto Kan called Friday for urgent cross-party discussions to tackle the nation's "unsustainable" dependency on public borrowing and avoid a financial crisis similar to the one that erupted in Greece.
"We can see from the Eurozone confusion that began in Greece that our finances can go bankrupt if we don't address our rising public debt," Kan said Friday in his first policy address to parliament. "It's difficult to wipe out Japan's massive debt overnight so we have to get working right away."
Kan's call for multiparty cooperation comes a month before elections that will determine his government's ability to pass legislation. Japan's debt burden, the world's largest, is approaching 200 percent of annual economic output, according to the Organization for Economic Cooperation and Development.
"The DPJ can change its irresponsible image as the public wants fiscal health and feels tax increases are inevitable," said Tsuneo Watanabe, senior fellow at the Tokyo Foundation, a think tank. "This is positive for the government as an election strategy and effective in giving foreign investors hope for the future of Japan's economy."
Kan took power on June 8, becoming the sixth prime minister in four years and second since his Democratic Party of Japan overturned five decades of mostly one-party rule last August. The DPJ lost one of its two coalition partners last month over a policy dispute and Shizuka Kamei, head of the other, resigned from the cabinet today.
"My biggest task is to go back to the starting point of the change in government to regain public trust," Kan said in a speech that lasted about 40 minutes. He proposed setting up a panel to discuss fiscal reform "beyond the boundaries of ruling and opposition parties."
Japan's government debt amounted to a record $9.7 trillion as of March 31, according to the Ministry of Finance. Japan has the world's largest bond market, followed by the United States, based on a ranking of 35 nations by the Bank for International Settlements in Basel, Switzerland, using data through September 2009.
Investor concern that a Greek deficit crisis will spread across the 16-member euro region last month prompted European leaders to pledge a bailout package worth $910 billion and forced the ECB to reverse its withdrawal of emergency stimulus.
Japan must take measures to address debt including "sweeping tax reform," Kan said, without mentioning whether he would raise the nation's 5 percent sales tax. Kan's predecessor, Yukio Hatoyama, said he wouldn't consider an increase for four years to prevent damage to consumer spending.
Kan, 63, said his government will announce details of an economic plan this month.