Japan's new Prime Minister Naoto Kan has promised an overhaul of budgetary policy in order to reduce the country's massive public debt mountain, warning of a Greece-style meltdown.
'Our country's outstanding public debt is huge,' said the centre-left leader in his first policy address since taking office on Tuesday. 'Our public finances have been the worst of any developed country,' he added.
Japan's public debt, after decades of stimulus spending and low tax receipts, is nearing twice the size of gross domestic product and has forced governments to issue ever more debt.
'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 euro zone 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,' he added.
Kan has in the past advocated increasing the consumption tax, although he has not specified plans that may prove unpopular with voters ahead of upper house elections planned for July 11. He said today that a full reform of the tax system was unavoidable.
