TOKYO (Reuters) - Japan’s opposition Democratic Party, which polls show could take power next month, on Monday mapped out plans to fund policies by cutting waste and other steps, but did not rule out fresh debt if the economy worsens.
An opposition victory in the August 30 election would end more than five decades of almost unbroken rule by Prime Minister Taro Aso’s Liberal Democratic Party (LDP) and raise the chances of breaking a stalemate in a divided parliament, where the Democrats and their allies control the upper house and can delay bills.
In its platform unveiled on Monday, the party focused on steps such as payouts for parents and farmers that would put money in the hands of households, and reiterated its vow to wrest control of policy from bureaucrats to cut wasteful spending.
“Our aim is to do politics with people at the center. We are at a historical turning point,” party leader Yukio Hatoyama told a news conference.
The platform showed the party would gradually increase the amount of revenues available to fund their policies through such steps as cutting waste, utilizing some profits from Japan’s huge foreign exchange reserves and selling government assets.
The amount would total 16.8 trillion yen ($177 billion) in the year to March 31, 2014.
The ruling Liberal Democratic Party, facing the prospect of losing power for only the second time since its founding in 1955, quickly criticized the opposition party’s plan.
“The funding source is irresponsible and it is extremely vague,” Jiji news agency quoted Prime Minister Taro Aso as saying.
Many investors in Japan’s financial markets would welcome an end to the political stalemate, but some worry the Democrats’ spending plans will inflate an already huge public debt and push up government bond yields.
Masayuki Naoshima, the party’s policy chief, said the Democrats would try to avoid issuing deficit-covering bonds to cover revenue shortfalls if it comes to power.
“We are thinking a great deal of fiscal discipline,” Naoshima told the same news conference.
But he added that government bond issuance might be unavoidable if Japan needs to come up with additional stimulus steps to shore up the economy.
“There’s also a view that the economy could go into decline,” Naoshima said. “In that case, we would have no choice but to consider taking steps to shore up the economy as emergency measures, and it’s possible we may have to issue deficit-covering bonds.”
Japan’s export-reliant economy is thought to be recovering from its worst recession since World War Two on a pickup in exports and industrial output. But any recovery in the world’s second-biggest economy is widely expected to be fragile due to uncertainty over the outlook for the world economy.
Naoshima also said that while the Democrats are keen to invest in new areas that would help the economy grow, their current focus is on policies to increase domestic demand.
“At this time, taking into consideration the current situation of the Japanese economy, the most important is to focus on domestic demand and to boost it,” Naoshima told reporters after the news conference.
Hatoyama repeated that the party would not raise the politically sensitive consumption tax from its current five percent for next four years.
The platform did not contain proposals on currency and monetary policies or managing Japan’s massive foreign reserves.
Additional reporting by Yoko Kubota; Editing by Sanjeev Miglani