Given the nation’s snowballing deficit and sluggish growth, Deputy Prime Minister and now also Finance Minister Naoto Kan announced Thursday plans to review government spending to reduce waste and come up with policies to expand the economy.

To procure funding for the Democratic Party of Japan’s campaign promises, including child-rearing allowance and free expressways, Kan said ministries and agencies will review their special accounts and public corporations by around the end of August, when they expect to make budgetary requests for fiscal 2011.

But he did not set a specific target to curb government debt, a focus of keen attention from overseas investors concerned about the fiscal sustainability of the government.

Kan only said the government will create a midterm fiscal framework in May or June giving an overall picture of spending and revenue for fiscal 2011 to 2013.

Citing the fiscal deficit, which amounts to almost 200 percent of the country’s gross domestic product, and slow economic growth in the past decade, Kan said comprehensive measures will be necessary, rather than merely focusing on the fiscal conditions of the government.

“(The issue is) how we can maintain fiscal discipline while enlarging the (economic) pie and changing fiscal appropriations,” Kan said in an interview with The Japan Times and other media organizations. “We will have to do these three things in parallel.”

Kan, 63, replaced Hirohisa Fujii as finance minister last week after the veteran financial expert resigned for health reasons.

The activist-turned-lawmaker is one of the founders of the DPJ and was appointed to the new position of strategy minister in the administration of Prime Minister Yukio Hatoyama to lead the newly created National Policy Unit.

During the interview, Kan also suggested that whether the consumption tax will be raised should be made clear before the next general election of the Lower House, which must be held at the end of August 2013 at the latest.

Although the DPJ pledged last year to keep the consumption tax at 5 percent, Kan suggested whether a hike will be necessary should be judged by the people during the next Lower House election.

“If we have such discussions (on a tax hike) until autumn 2013, the right direction will be visible by that time,” Kan said.

However, he stressed the government will first need to eliminate wasteful spending while considering optimum budget appropriations.

Kan said he is confident the government and the Bank of Japan have been coordinating their policies well and said he hopes to communicate and work together with the central bank.

Kan in particular praised the BOJ Policy Board’s decision late last year to make clear its determination to fight deflation and pump some ¥10 trillion into the banking system to keep the economy on a recovery track.

Finance ministers and central bank governors from the Group of Seven are scheduled to meet in Canada in early February. Kan said the most important topic to be discussed will be how each nation will revive its economy.

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