Prime Minister Naoto Kan vowed Friday to fix the suffering economy with a stream of measures aimed at putting the brakes on deflation and coping with the strong yen.

But facing a divided Diet and distracted by a diplomatic tussle with China, Kan also made sure to call on the opposition to cooperate in enacting policies and stressed the need to take a firm stance with China on territorial issues.

Kan’s policy speech was delivered on the first day of an extraordinary Diet session that is expected to run 64 days through Dec. 3. While his top priority will be to pass a supplementary budget to finance an economic stimulus package, his ruling Democratic Party of Japan faces a rocky road ahead without an Upper House majority.

“Four months since I was given the reins to the administration, and after being re-elected as DPJ president in September and reshuffling the party and the Cabinet, the government is now ready to go into full-scale operations,” Kan said.

Kan said the government needs to move forward on promoting economic growth, restoring fiscal health and reforming social security while promoting regional sovereignty and pushing forward with a proactive foreign policy.

He said the government will take the lead in increasing employment, which he described as the “wheels of economy,” to calm public anxiety and reduce deflationary pressure.

He also promised to adopt a three-step method to restore the nation’s finances, including a recently approved ¥917 billion stimulus package, and said the government and the Bank of Japan will not hesitate to intervene in currency markets if necessary.

The second step will be drafting and passing a supplementary budget during the session. The third will involve drafting next year’s budget and tackling tax reform. Kan said he plans to compile a proposal to revise corporate taxes by the end of the year.

“I will say this again, but the primary challenge of this Diet session is to enact the supplementary budget, the second step in my economic policy,” he said. “I sincerely hope that constructive deliberations will be undertaken by the ruling and opposition parties.”

In the long term, Kan said the government plans to restore fiscal health by achieving a primary balance surplus by fiscal 2020. As a start, he promised to slash wasteful spending when drafting next year’s budget by slimming down the bureaucracy and taking other steps.

Kan said he intends to continue to strive for social security reforms to cope with the aging population and ballooning social security costs.

To pay for such reforms, Kan reached out to the opposition to join the debate on tax reform — including a potential hike of the consumption tax — and sound out voters on the idea.

While promising to continue supporting child-rearing and promoting gender equality, Kan said he intends to push forward with promoting regional autonomy by granting lump subsidies to local governments to be used at their discretion, rather than having the central bureaucracy dole out grants with strings attached.

Regarding foreign policy, Kan emphasized that it is necessary for Japan to take a proactive role in international society to secure national “peace and prosperity.”

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