DAVOS-UPDATE 1-Japan PM urges Mubarak dialogue with Egyptians

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By Natsuko Waki

DAVOS, Switzerland Jan 29 (Reuters) - Japanese Prime Minister Naoto Kan urged Egyptian President Hosni Mubarak on Saturday to start a dialogue with his people with the country gripped by unprecedented protests.

Mubarak was clinging to power but replaced his cabinet on Sunday in an effort to appease angry Egyptians who demonstrated in their tens of thousands to demand an end to his 30-year authoritarian rule.

"There's some social instability there, but President Mubarak has announced reforms. We expect that the Egyptian government will start a dialogue with many people immediately and initiate reforms and create an administration in a way to gain broad support and participation of the people," Kan said in a speech to the annual World Economic Forum in Davos.

Kan said he was making the appeal because Japan had a history of good relations with Egypt, adding he hoped dialogue would help restore political stability and civil rights.

He added that politically unstable countries -- such as Egypt -- should re-connect with those who are left out.

"For politically instable countries... if you leave unhappy people unhappy, that will bring political troubles," he said.

Kan reaffirmed Japan's position to support African economies to help them strengthen ties with the international community and participate in the global markets.

JAPAN TO OPEN UP

Kan, who was staying in Switzerland for only five hours, reiterated a commitment to open up Japan's market to capitalise on overseas growth and stuck to a June deadline to decide whether to join the Trans-Pacific Partnership, a U.S.-led free trade initiative.

The TPP started as a trade pact between Singapore, New Zealand, Chile and Brunei. Australia, Peru, Vietnam, Malaysia, and the United States have started negotiations to join it.

Adding Japan's $5 trillion economy would greatly increase the potential market-opening gains of the proposed pact.

Asked about China's rise to an economic superpower, Kan said: "I welcome China's growth expansion to the world's second largest economy. It also brings economic benefits to Japan."

"China must understand an increasing international role and responsibilities that comes with the economy, and act accordingly."

Sino-Japanese relations deteriorated sharply after September when Japan detained a Chinese skipper whose trawler collided with Japanese patrol boats near a chain of disputed islands in the East China Sea, called Senkaku in Japan and Diaoyu in China.

Kan has come under fire from domestic critics for not having a coherent diplomatic strategy and mishandling territorial rows with China and Russia. Ties with ally Washington frayed under his predecessor due to a dispute over a U.S. Marines airbase.

Kan made no new comments about Japan's economy and fiscal policy. Standard & Poor's cut Japan's credit rating on Thursday for the first time since 2002 because of its mounting debt.

For full coverage, blogs and TV from Davos go to www.reuters.com/davos (Additional reporting by Ben Hirschler; editing by Mark Heinrich)