Compiled Aff Answers

Impact Turn – Econ Reform Good

June 11 (Bloomberg) -- Japan’s ruling party pledged to balance the country’s budget by 2020 and address what Prime Minister Naoto Kan called an “unsustainable” dependency on public borrowing that threatened a crisis similar to the one that erupted in Greece.

“We can see from the eurozone confusion that began in Greece that our finances can go bankrupt if we don’t address our rising public debt,” Kan said today in his first policy address to Parliament. “It’s difficult to wipe out Japan’s massive debt overnight so we have to get working right away.”

Kan called for cross-party cooperation in tackling Japan’s fiscal burden a month before elections that will determine his government’s ability to pass legislation on its own. Japan’s debt burden, the world’s largest, is approaching 200 percent of annual economic output, according to the Organization for Economic Cooperation and Development.

“The DPJ can change its irresponsible image as the public wants fiscal health and feels tax increases are inevitable,” said Tsuneo Watanabe, senior fellow at the Tokyo Foundation, a think tank. “This is positive for the government as an election strategy and effective in giving foreign investors hope for the future of Japan’s economy.”

Despite misgivings in his own party, Prime Minister Naoto Kan has pledged to raise the 5 percent consumption tax in a few years to fund snowballing social security costs and avoid a fiscal crisis like the one that engulfed Greece."We decided to break the ice and mention it in our manifesto," the Democratic Party of Japan leader said last week, calling for full debate on tax reform and crediting an opposition plan to double the sales tax to 10 percent. Even when the dangers of ignoring fiscal reform are obvious, talk of raising taxes is a political taboo because the parties that attempt it usually get slapped in subsequent elections. But experts said Kan's bold move was backed by the DPJ's newfound popularity since he took over from Yukio Hatoyama. He is confident he can win voters over, given national concern that a fiscal meltdown could devastate the economy for years, they said. "Considering the nation's poor fiscal health, it's quite obvious that a tax hike will eventually be necessary," said Satoru Matsubara, an economics professor at Toyo University. "So it was a question of finding the right timing," he said, adding that Kan's firsthand experience monitoring the economy as finance minister in the previous Cabinet lends a sense of urgency to the situation.That urgency may be justified. Kan has voiced frequent warnings about the nation's enormous public debt since Greece entered crisis earlier this year. Now that the crisis has forced fiscal reform to spread through Europe, Kan said Tuesday he would stake his political career on the issue. A consensus on a tax hike has emerged on both sides of the political divide. The conservative Liberal Democratic Party, the leading opposition party, said June 17 it would campaign on the need to double the consumption tax to 10 percent. The DPJ said it might use that figure as a reference point. Before Kan broached the issue, a majority of voters appeared surprisingly supportive of raising taxes. According to a June 8-9 Kyodo News survey, 60 percent of respondents backed a consumption tax hike while 40 percent opposed it. This may have emboldened Kan.