UPDATE:Japan's Kan Vows To Pursue Both Growth, Fiscal Reform

(Adds more quotes from Finance Minister Kan, more background)


By Takashi Nakamichi and Tomoyuki Tachikawa

TOKYO (Dow Jones)--Japan's finance minister Naoto Kan said Thursday he will aim to simultaneously bolster growth and repair the nation's tattered finances if he wins Friday's party election to become prime minister.

Kan offered few specifics on what policy steps he would implement, but his comments made it clear that a government under his leadership wouldn't necessarily place growth over fiscal rehabilitation as the current Yukio Hatoyama administration appears to have done.

"Economic growth, fiscal reforms and social security improvements are areas that we can deal with and enhance as one package," Kan said at a news conference as he explained his policy platform ahead of the ruling Democratic Party of Japan's presidential election. "The time has come for us to make a serious push" to get those reforms done, he said.

Comments from the 63-year-old Democratic Party of Japan heavyweight carry significant weight now that he is widely expected to win the poll, the winner of which will replace outgoing Prime Minister Hatoyama. Kan's likely sole competitor is Shinji Tarutoko, a 50-year-old DPJ lower house member.

Since the current administration was launched in September, it has largely focused on fixing the nation's crisis-hit economy, putting fiscal rehabilitation on the back burner. The national budget it compiled for the ongoing fiscal year started in April features a record Y92.299 trillion spending and a record Y44.3-trillion new borrowing. Although Kan is an original member of the cabinet and initially supported a expansionist policy, he has grown increasingly fiscally conservative over recent months as he watched Greece's debt problem rock the global financial markets.

Kan Thursday pledged to finalize by the end of this month growth strategies and fiscal reform plans that the Hatoyama cabinet has been working on. With them "I will achieve a strong economy, a strong fiscal state, and a strong social security system in an integrated fashion," he said.

He said he will try to generate more jobs to get the economy on a firmer footing, without explaining how. "I have decided to run (in the election) to lead a campaign of implementing policy to break through 20 years of Japan's deadlocked situation," Kan said. "Unless we steer policy in a wrong direction, we can resuscitate the economy. We can correct the current state in which (government) borrowing seems to keep growing indefinitely."

Japan's long economic stagnation since the bursting of an economic bubble in the early 1990s is due to policy missteps of the previously ruling Liberal Democratic Party administrations including ineffective public works projects, he said.

On the national security front, Kan said he will make "big and sustained" efforts to reduce the burden of the southern island of Okinawa for hosting U.S. military bases. But he also said he finds it necessary to "take into consideration the (recent) U.S.-Japan agreement" to keep a Marine air station in the prefecture and that the U.S.-Japan alliance is the bedrock of Tokyo's diplomacy.

Kan, however, added that he will "likewise place importance" on deepening ties with China. Kan also suggested that he may not give DPJ Secretary-General Ichiro Ozawa--the party's second most powerful man and chief election strategist--any key post in a new government or party management. Ozawa's funding scandal has caused public mistrust in politics and put the Hatoyama government in a precarious position, Kan said.

"Mr. Ozawa should stay quiet for a while, and that would be good for him, the DPJ, and Japanese politics," Kan said. "We have to value Mr. Hatoyama's feelings" that the DPJ should restart as a fresh party free from money scandals. Ozawa is set to step down from the current post Friday.

-By Takashi Nakamichi and Tomoyuki Tachikawa, Dow Jones Newswires; 813-6269-2781;



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