Japan ruling party should review pledges

TOKYO (Reuters) - Japan's ruling Democratic Party must review costly campaign commitments before a mid-year election and only promise policies it can pay for, a party lawmaker in a panel drafting the pledges said on Wednesday.

The Democratic Party of Japan (DPJ), in drawing up its platform ahead of an upper house election expected in July or August, faces tough choices as it tries to avoid inflating an already huge public debt while bolstering the fragile economy.

With support for the party and Prime Minister Yukio Hatoyama's government slipping, some analysts say the DPJ is unlikely to make major changes to campaign pledges it made before a landslide general election win last August.

But DPJ lawmaker Koichiro Genba, member of a panel aiming to finalize the party's manifesto by the end of May, said the party should first look at how much funding it can secure, such as through bond issuance and taxes, before deciding on policies.

"We need to overcome deflation and get the economy on a recovery path but at the same time, we must send out the message that our finances are sustainable," Genba told Reuters in an interview.

"Policies need to be backed up by funds to some extent ... otherwise there will be a backlash to an election campaign based on lies," he said.

But he added that some in the party did not share his views due to concern about the impact of policy revisions on voter support.

The government has already dropped a plan to end a decades-old gasoline surcharge, citing a lack of funds, but the DPJ has been divided on other pledges, such as payouts to families with children and a plan to eliminate highway tolls.

Analysts have worried that the Democrats' policies will add to the huge public debt, already almost twice the size of the economy, as tax revenues fall on a sluggish economy and cost-cutting efforts fall short of expectations.

If the Democrats keep their campaign pledges, the government would need to pay an extra 2.6 trillion yen ($26.9 billion) in payouts to families in the year starting next April, while making highway tolls free would cost another 1.2 trillion yen.

Genba, who studied at a school for political leaders that embraces free-market policies, also said he was pushing for the DPJ's campaign platform to include steps to deregulate the economy.

Analysts have long said that Japan needs bold structural reforms in areas such as agriculture and medical services, but progress has been slow as politicians fear upsetting interest groups including farmers and doctors.

"The DPJ's economic policies have focused on redistributing existing wealth and that's important too, but it also needs policies to strengthen competitiveness and growth," Genba said.

"Having the party include specific steps on deregulation in the manifesto will make it easier for the government to implement regulatory reforms."

($1=93.09 Yen)