TOKYO – Japan could face a financial mess like the one that has crippled Greece if it does not deal urgently with its swelling national debt, the new prime minister warned Friday.
While Japan is on firmer financial footing than Greece because most of its debt is held domestically, Prime Minister Naoto Kan's blunt talk appeared designed to push forward his agenda, which may involve raising taxes.
Speaking in his first address to Parliament after taking office Tuesday, Kan said Japan cannot continue to let government debt swell while state finances are under pressure from an aging and declining population.
"It is difficult to sustain a policy that relies too heavily on issuing debt. As we have seen with the financial confusion in the European community stemming from Greece, our finances could collapse if trust in national bonds is lost and growing national debt is left alone," he said.
Japan, the world's second-largest economy, has the largest public debt among industrialized nations at 218.6 percent of its gross domestic product in 2009, according to the International Monetary Fund.
Kan, who became Japan's sixth prime minister in four years after a short stint as finance minister, promised his government would work closely with the Bank of Japan to avoid an increase in deflation and would focus on developing a "strong and comprehensive" policy.
Kan has said he will also consider raising taxes, an issue he said previous governments had been too timid to face. A social progressive and a fiscal hawk, Kan said he would announce further details of his economic growth plan later this month.
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Mr. Geithner and Mr. Bernanke, Japan's Prime Minister
is on the phone...
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