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Japan PM pledges fiscal reform, seeks opposition help

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By Kiyoshi Takenaka

TOKYO (Reuters) - Japan's prime minister reaffirmed his commitment to curbing public debt on Tuesday and warned taxes will have to rise, while reaching out to the opposition for help in tackling the multitude of problems facing the country.

Yoshihiko Noda, who became the nation's sixth premier in five years early this month, did not offer any specific new policies in his first speech to parliament since taking office.

But he reiterated the government and the central bank needed to do everything possible to tame the yen's strength, which is driving manufacturers abroad and threatening to stunt recovery from a slump triggered by the March 11 earthquake and tsunami.

The 54-year-old former finance minister takes over six months after the disaster ravaged the country's northeast, leaving 20,000 dead or missing and triggering the world's worst nuclear accident in 25 years.

The government has yet to bring the crippled Fukushima nuclear plant under control, while Noda needs opposition help in a divided parliament to secure funding for Japan's biggest rebuilding effort since the end of World War Two.

"Let me ask from the bottom of my heart for the participation of each party in policy debate on social security and tax reforms, so that we can form a consensus necessary for the bills' passage," Noda said.

The government is expected to submit the main reconstruction funding bill, which is likely to exceed 10 trillion yen ($130 billion), to parliament next month.

Sprinkling his speech with references to "hope and pride," Noda called on the country to look to the future.

"While overcoming the twin crises of the 'Great East Japan Earthquake' and the global economic crisis, we must invest in this country's future so people are filled with hope and each and every citizen can be proud and feel, 'I am glad I was born in this country'," Noda said.

Noda, who hails from the more conservative wing of his Democratic Party, also urged Japan not to turn inward as it grapples with domestic challenges. He called for deeper ties with security ally Washington and urged rival China to play a role as a "responsible member of international society."

ROCKY START

Noda took over the prime ministerial reins, with high support ratings of 60 percent ore more, from deeply unpopular Naoto Kan.

But the new cabinet got off to rocky start as his trade minister was forced to quit after just eight days in office following reports he joked with reporters on the sensitive subject of radiation during his trip to the Fukushima area.

The opposition has said it would grill Noda on his personal choices and the call for cooperation met with cool reception from the biggest opposition group, the Liberal Democratic Party. However, the second-largest opposition party, New Komeito, sounded more welcoming.

"I would like his cabinet and the ruling party to share his resolution and do their utmost in tackling issues. If we can feel their determination, we would be happy to respond," party head Natsuo Yamaguchi said.

Noda stressed that curbing the public debt, twice the size of the $5 trillion economy, could not wait and economic growth was necessary to salvage public finances creaking under the strain of a growing army of retirees.

"We cannot carry on forever with a kind of fiscal management where debt keeps piling up in a snowball effect."

Higher taxes, spending cuts and higher revenues generated through economic growth were all needed to achieve fiscal reforms, said Noda, the ruling Democratic Party's main advocate of fiscal discipline.

He said the government planned to prepare a new growth strategy by the end of the year and a new energy policy by summer 2012 to better account for the impact of the March disaster and radiation crisis on the economy.

Noda, who as finance minister led three yen-selling currency market interventions in the past 12 months, again voiced alarm over the yen's persistent strength saying it was making manufacturers big and small "scream."

"In order to stop industry 'hollowing out' and keep domestic employment, we need to collaborate with the Bank of Japan ... and take all policy steps available." ($1=77 yen)

(Additional reporting by Yoko Kubota and Linda Sieg; Editing by Tomasz Janowski and Raju Gopalakrishnan)