Japan PM eyes policy tie-up with opposition

Japan PM eyes policy tie-up with opposition

Tokyo: Japan’s prime minister will seek cooperation with two swing-vote opposition parties on a policy-by-policy basis, a newspaper reported on Tuesday, as he faces political deadlock that could harm Japan’s credit rating.

Prime Minister Naoto Kan’s ruling coalition suffered a major blow in Sunday’s upper house election, putting his policies to deal with the country’s massive debt at risk and prompting a warning by credit rating agency Standard & Poor’s that it could cut Japan’s sovereign ratings.

Kan’s Democratic Party still control the powerful lower house. But it needs help from other parties to push bills through the upper chamber as they struggle to end decades of stagnation in the world’s No.2 economy and curb debt.

Kan, who took over from his unpopular predecessor just last month, said early on Monday that the Democrats would ask opposition parties to cooperate on a policy-by-policy basis rather than invite them into a formal coalition right away.

The Yomiuri newspaper, without citing sources, said on Tuesday the premier told people close to him that he would seek such cooperation from the New Komeito and pro-reform Your Party, and keep in mind the future option of seeking a formal coalition.

The Buddhist-backed New Komeito, Japan’s third largest party, backs policies to fix the country’s social security system and social safety net. The party could agree to the DPJ’s proposal to discuss a possible rise in the 5 percent sales tax as long as the government first tackles the social security system.

The tiny Your Party, which won 10 seats in Sunday’s poll, could cooperate with the DPJ on policies such as overhauling the country’s bureaucratic system or getting the Bank of Japan to do more to defeat deflation.

Rocky road ahead

But Kan is expected to face a tough road ahead as those two parties have rejected the idea of joining the government, opening the door to a period of political manoeuvring and likely policy paralysis.

The parliamentary deadlock makes it difficult for the government to address key issues confronting Japan — such as tax reform including a higher sales tax to plug revenue gaps and a lower corporate tax to boost competitiveness, reform of the creaking pension and healthcare systems and crafting a growth strategy to end two decades of stagnation.

Bills at risk in an extra parliament session expected in autumn include one to scale back postal privatisation, sought by Kan’s current small coalition partner, the People’s New Party, but opposed by the Your Party.

Without a coalition upper house majority, it looks almost impossible for the legislation to be enacted any time soon.

In a sign of a possible delay in promoting steps to fix the tattered state finances, the ruling party’s No.2, Yukio Edano, said on Monday that the Democrats would map out the size of a future sales tax at a pace that allows it to try and gain public support for the measures, rather than strictly sticking to a planned deadline of the end of March 2011.

Many accept a sales tax rise is needed, with public debt about twice the size of the $5 trillion economy. But the election defeat suggested the DPJ did not convince voters it had a clear plan to cure Japan’s economic ills with the painful tax hike.

Kan now faces a possible challenge from party critics including powerbroker Ichiro Ozawa — a critic of his sales tax hike proposal — ahead of a September party leadership vote.