UPDATE 4-Japan's LDP tries to steal opposition thunder

Fri Jul 31, 2009 6:28am EDT

(For more stories on Japanese politics click [ID:nPOLJP])

* Ruling party, at risk of defeat, unveils election platform

* Ruling LDP promises to boost household disposable income

* LDP portrays self as fiscally responsible party (Adds PM comments)

By Linda Sieg and Chisa Fujioka

TOKYO, July 31 (Reuters) - Japan's main ruling party, facing possible defeat in elections next month, tried to upstage the opposition on Friday with its own policy pledges to boost household income and revive the struggling economy.

Prime Minister Taro Aso also portrayed his ruling Liberal Democratic Party (LDP) as more responsible on fiscal policy and security issues, promising to repair tattered public finances and continue Japan's naval missions abroad.

The pledges came as data showed Japan's jobless rate rose to a six-year record high of 5.4 percent, reinforcing views that the job market will take time to recover despite recent improvements in industrial output. [ID:nT23765] [ID:nT269047]

"The difference between us and other parties is that we have the ability to take responsibility," Aso told a news conference where the platform was unveiled.

The LDP promised in its platform to boost disposable household income on average by at least 1 million yen ($10,470) by 2020 and achieve economic growth of 2 percent by the second half of the fiscal year from April 2010. [ID:nT187654]

To address bulging public debt, the LDP pledged to raise the 5 percent sales tax once the economy recovers to help fund the growing costs of a fast-ageing society.

Surveys show the LDP is at risk of losing to the opposition Democratic Party of Japan (DPJ) in the Aug. 30 general election, which would end more than half a century of almost unbroken reign by the business-friendly party. [ID:nT44020]

HAVING IT BOTH WAYS

While an opposition win would not mean a drastic shift in policies, it would raise the chances of breaking a stalemate in parliament, where the Democrats and smaller allies control the upper house and can delay bills.

The opposition Democrats have promised to put more money in the hands of consumers by providing child allowances, eliminating expensive highway tolls and making gasoline cheaper to boost domestic demand.

They argue their spending plans are fundamentally different from the LDP's traditional emphasis on policies that benefit industries and firms. [ID:nT115439]

The Democrats said on Friday their spending plans would raise economic growth by two percentage points in the fiscal year from April 2012 and rejected accusations of fuzziness on funding.

"We have the funds, it's just a question of prioritisation," Democratic Party policy chief Masayuki Naoshima told Reuters in an interview. [ID:n320130]

The party has ruled out raising the sales tax for the next four years and argues that its spending plans can be financed through measures such as tapping special reserves, reducing government staff and cutting public works projects.

The LDP, which has attacked the Democrats as being profligate, risked being criticised for echoing the opposition's focus on consumers.

"They are disparaging the Democrats ... as fiscally irresponsible," said Koichi Nakano, a professor at Tokyo's Sophia University. "If they start to do something else because they are worried about the effectiveness of the DPJ campaign, they will look somewhat schizophrenic."

Robert Feldman, chief economist at Morgan Stanley in Tokyo, said the LDP -- which has already backtracked on previous fiscal reform targets -- needed to spell out details of how it would reduce the public debt, already nearly 170 percent of GDP.

"All they have said is that they will make the economy better and then will hike taxes. That doesn't cut the mustard as an economic policy," he said.

Four years ago, charismatic leader Junichiro Koizumi led the LDP to a huge victory a lower house election on a platform promising to push ahead with market-friendly structural reforms, but such measures got hardly a nod in the new party promises.

"In recent years, we pushed for reforms to energise the economy, but distortions such as gaps in income and the impoverishment of the regions have increased. We cannot continue to ignore such problems," Aso said.

Aso stressed the LDP's commitment to Japan's tight security alliance with the United States and criticised the opposition Democrats for flip-flops over security policy.

Opposition Democratic Party leader Yukio Hatoyama said this week that he would end a refuelling mission in support of U.S.-led forces in Afghanistan in January, appearing to contradict comments by two senior party officials. [ID:nT289104]

"We can not entrust the safety of Japan to a party that wavers on the fundamentals of this country's security policy." (Additional reporting by Yoko Nishikawa and Hideyuki Sano, Editing by Nick Macfie)

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