Japan business leaders fear stalemate

Tokyo - Japan faces mounting fiscal challenges and cannot afford a lengthy stalemate after this weekend's huge electoral setback for Prime Minister Naoto Kan, business leaders warned Monday.

"We cannot afford to delay the national policy even for a second," Tadashi Okamura, president of the Japan Chamber of Commerce and Industry, said.

"I want not only the ruling parties but also the opposition to share the sense of crisis," said Okamura, a former chairperson of electronics and nuclear plant giant Toshiba. Japan stood at a "crucial crossroad," he said.

Kan's centre-left government lost its narrow majority in parliament's upper house at elections Sunday, spelling likely policy gridlock.

Having gone into the election seeking a stable political base from which to tackle the nation's massive debt, the government's loss of its majority means probable delays to fiscal rehabilitation, analysts say.

Japan's fifth premier in four years, Kan has put fiscal discipline at the core of his agenda to fix the country's finances and slash the world's biggest public debt, which is almost twice the size of the economy.

In shifting focus to public debt, Kan warned of the risk of a Greek-style meltdown and talked about raising consumption tax.

Voters were turned off, but business lobbies are keen to see tax reform happen.

The business community has advocated slashing Japan's relatively high corporate tax to offer a competitive environment and imposing a sales tax hike to reduce the public debt.

But without its narrow Upper House majority, the DPJ lacks the momentum needed to push through legislation as it scrambles for new allies.

"The ruling coalition was defeated worse than I had expected," said Hiromasa Yonekura, chairperson of the Japan Business Federation (Nippon Keidanren).

"It mustn't happen that addressing the mounting problems is postponed in the hung parliament," said Yonekura, who is also chair of Sumitomo Chemical Co.

The government was not immediately threatened by Sunday's result because it holds a majority in the more powerful lower chamber.

 - AFP