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The new Prime Minister of Japan, Naota Kan warned the nation about the financial threat that Japan is facing. The national debt is swelling and needs to be dealt immediately so as to save the nation from financial mess similar to what Greece is facing right now.
Though as per the statistics Japan has much more stable financial position as compared to Greece as most of the debt is domestic. But Prime Minister used such blunt words so as to be able to push forward his agenda without much difficulty. The agenda includes the raising taxes.
This was Naota Kan’s first speech after taking the office this Tuesday. In his first address to the Parliament 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.
According to International Monetary Fund, Japan has the largest amount of public debt at 218.6 percent of its total gross domestic product in the year 2009, among all the industrialized nations.
In the last four years, Kan has become the sixth Prime Minister of Japan after doing a short stint as the Finance Minister. Kan is planning to work closely with the Bank of Japan in order to avoid any further increase in deflation and also promised the government that he’ll focus on the development of strong and comprehensive policies.
Kan also indicated that he is considering raising the taxes, though the full details of his economic growth plan will be announced later this month. But he made clear what he aims for, which is 2 percent growth of the economy annually by the end of fiscal year 2010.
Analysts feel that the comparison of Japan with Greece as used by Kan as a warning in his speech was an overstatement.
“Greece had a huge public debt and huge overseas loans,” said Hiromichi Shirakawa, Chief Economist at Credit Suisse Japan. “Japan has a trade surplus, and it’s a major creditor nation … I don’t think Japan’s fiscal conditions is facing a similar crisis.”
“Instead of focusing too much on fiscal tightening, Kan should simply focus on growth strategy that works for Japan’s matured economy as the nation’s population continues to age and shrink”, he added.
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