New Japan PM vows to cut spending, says little on tax

Tokyo, Sept 29 | Updated: Sep 30 2006, 05:30am hrs
Japanese Prime Minister Shinzo Abe, laying out the agenda for his new administration, said on Friday he would cut spending to restore state coffers but did not go into specifics on tax reforms.

Reiterating his slogan of no fiscal reform without growth, Abe also said new government bond issuance in the fiscal year from next April would be kept below the 29.97 trillion yen ($254.5 billion) issuance for the current year.

I cannot ask the Japanese people to bear more of a burden before fixing wasteful and inefficient activity by the central and local governments, Abe told parliament in his first policy speech since taking office on Tuesday.

I will strongly push forward administrative reforms and create a muscular government that is simple and efficient.

Abe said he would consider raising taxes only when cutting wasteful spending and promoting other reforms were insufficient to cover rising social security costs. He said he would neither run away from reforming Japans consumption tax nor solely rely on the tax to finance such costs. He did not elaborate. There is heated debate in Japan over when and by how much the consumption tax - currently 5% - should be raised, but a rise is seen as inevitable as the country looks to cut its debt mountain equivalent to 150% of gross domestic product. An unpopular rise in the consumption tax in April 1997, blamed by economists for helping to trigger a recession, earned the ruling Liberal Democratic Party (LDP) a drubbing in elections the following year.

Abe had set out his stance on fiscal and tax reforms on Tuesday at his first news conference after being chosen as Japans youngest leader since World War Two. Analysts have raised doubts whether Abes growth-oriented approach to fiscal consolidation efforts would be able rein in Japans massive outstanding public debt, the worst among major industrial nations.

On another politically sensitive idea, of broadening the use of revenue from a gasoline tax and other tariffs currently earmarked for road construction, Abe said he would consider opening the tax revenue to general use, although he would keep the tax rate level unchanged.

Abe reiterated his commitment to second chance measures to ensure reforms did not result in a society of permanent winners and losers. As part of this, he said he wanted to reduce the number of young adults who hop from one part-time job to another to 80% of its peak by 2010.

Reuters