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Japan's PM warns debt must be slashed

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Japan's PM warns debt must be slashed
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Japan could face a Greek-style fiscal crisis if it does not slash its huge public debt, the country’s new prime minister warned on Friday.

Tokyo’s debt burden is the world’s largest at nearly 200 percent of GDP — equivalent to 8 trillion euros.

PM Naoto Kan said Japan risks defaulting on that borrowing without changes to fiscal policy.

“It is difficult to sustain a policy that relies too heavily on issuing debt,” he told lawmakers.

“As we have seen with the financial confusion in the European community stemming from Greece, our finances could collapse if trust in our national bonds is lost and our growing national debt is left alone.”

Kan also said “sweeping tax reform” would be needed: a nod to a proposed rise in the nation’s 5 percent sales tax.

The new premier, who took power on June 8, was speaking hours after his banking minister Shizuka Kamei stepped down.

Kamei clashed with Kan over his outspoken attacks on postal privatisation and support for big spending.