Japan PM admits mistakes, asks voters for patience

TOKYO Fri Mar 26, 2010 6:50am EDT

Japan's Prime Minister Yukio Hatoyama listens to a reporter's question during a news conference in Tokyo March 26, 2010. REUTERS/Yuriko Nakao

Japan's Prime Minister Yukio Hatoyama listens to a reporter's question during a news conference in Tokyo March 26, 2010.

Credit: Reuters/Yuriko Nakao

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TOKYO (Reuters) - Japanese Prime Minister Yukio Hatoyama, his ratings sliding ahead of a key election, admitted on Friday his novice government had made mistakes but asked voters to be patient while he pursued his agenda of change.

Hatoyama gave few concrete clues, though, as to how his 6-month-old administration would resolve thorny policy problems, like keeping costly campaign pledges without inflating Japan's massive public debt and settling a row with security ally Washington over a military base without upsetting residents.

Hatoyama's Democratic Party of Japan needs to win an outright majority in an upper house poll likely in July to avoid policy deadlock, but voter concerns about lack of leadership, messy decision-making and funding scandals are dimming that prospect.

"It's been half a year since we took power. I think we still have problems as we are inexperienced," Hatoyama, 63, told a news conference to mark enactment of a record $1 trillion budget for the year from April.

"But we must not turn back the hand of the clock. I would like to set the hands forward for a great future, so I would like to ask the Japanese people to guide us with patience."

The Democratic Party swept to power in a general election last year, ending more than 50 years of rule by its conservative rival and promising to put more money in the hands of consumers to boost domestic growth, cut waste, and rein in bureaucrats.

But the DPJ's pledges, along with pressure from a tiny coalition partner to spend more to ensure a fragile recovery stays on course, are raising concerns in financial markets about inflating a public debt now nearing 200 percent of GDP.

Hatoyama acknowledged the need for fiscal discipline and said he was open to a legally binding framework to restore Japan's tattered finances. The government is to unveil a mid-term plan for fiscal reform in June, along with a growth strategy.

"The complete loss of fiscal prudence would prompt a sell-off of Japanese government bonds," Hatoyama said. "I basically agree with Finance Minister (Naoto) Kan that the government should compile a legally binding framework for fiscal prudence."

SIDESTEPPING QUESTIONS

Fitch, Moody's and Standard and Poor's have all warned Japan it faces a ratings downgrade, which could raise the borrowing costs for the most indebted of the industrialized nations and rattle investors who are already nervous about Greece's debt and the sovereign risk facing other European nations.

But the premier dodged the question of whether the Democrats would revise more campaign promises. Party kingpin Ichiro Ozawa last year pushed the government to jettison a pledge to abolish a decades-old gasoline surcharge because of falling tax revenues.

"We will try as much as possible to realize the manifesto and with that in mind, we will work on the fiscal problem as well," Hatoyama said.

He also did not give any hint of how he would settle the feud over relocating the U.S. Marines' Futenma airbase on Japan's Okinawa island. Analysts say Hatoyama may have to quit if he can't do so by his self-imposed deadline of the end of May.

During last year's election campaign, Hatoyama raised hopes the base could be moved off Okinawa, host to the bulk of America's 47,000 military personnel in Japan.

Hatoyama repeated that goal on Friday. "My responsibility is to do my level best so that we can relocate (the base) outside of the prefecture, instead of thinking up excuses," he said.

But Washington wants Tokyo to stick to a 2006 agreement to move Futenma's functions to a less crowded part of Okinawa, although officials have said they would look at other proposals.

Hatoyama also acknowledged voter dissatisfaction with funding scandals and the dissonance that has plagued his coalition cabinet regarding important policies, most recently over plans to privatize Japan Post, the world's biggest financial conglomerate.

"The problem of politics and money and lack of leadership on my part have invited questions among the people. They have been disappointed because of their big expectations, I realize that," he said. "I know the importance of personnel, but at the moment, I need to have the cabinet work together."

(Additional reporting by Stanley White and Chisa Fujioka; Editing by Paul Tait)

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