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Japan PM signals election can wait, defies opposition

Japan's Prime Minister Yoshihiko Noda delivers a speech at the opening reception for the annual meetings of the International Monetary Fund
Japan's Prime Minister Yoshihiko Noda delivers a speech at the opening reception for the annual meetings of the International Monetary Fund

By Tetsushi Kajimoto

TOKYO (Reuters) - Japan's Prime Minister Yoshihiko Noda made clear on Monday he was in no rush to go to the polls, speaking of the risk of a "political vacuum" in a speech likely to anger an opposition that has urged him to keep a promise to call an election soon.

The ruling Democratic Party of Japan (DPJ) swept to power in 2009 and holds a slim majority in the powerful lower house of parliament, but the opposition's domination of the upper house has it allowed it to block crucial budget deficit funding legislation.

The opposition Liberal Democratic Party (LDP) is using the issue to press Noda into calling an early election, at a time when opinion polls show Noda is likely to lose any vote.

But the prime minister showed no sign of being cowed when he delivered a policy speech at the opening of an extra parliament session called primarily to pass a bill needed to fund a 38.3 trillion yen ($474 billion) deficit.

"In order to fulfill my responsibility for tomorrow, I cannot abandon jobs halfway to their completion," Noda told the lower house. "We shouldn't create at will a political vacuum that would cause policies to stall."

Speaking on the eve of a review of monetary policy by the Bank of Japan, Noda also vowed to work with the central bank more closely to support the economy, using terms employed in the past to pressure the central bank into easing policy.

Noda's cabinet approved a $5.3 billion fiscal stimulus plan last week that economists said was too small to have much impact, and piled more pressure on the BOJ, which is expected to boost monetary stimulus steps at Tuesday's meeting.

Unless Noda wins opposition backing for the funding bill Japan's government could run out of money by the end of November, but there were scant signs that the opposition was ready to cooperate.

Noda had promised in August to call an election "soon" in order to secure opposition votes for another key piece of legislation - his signature sales tax increase plan designed to shore up state finances saddled by swelling social security costs.

But he has been coy on exactly when he will call the election for the lower house, which must be held by August next year.

Analysts believe he is unlikely to do so in the near future given his party's poor ratings in opinion polls.

"Noda wants to delay the day of reckoning as long as possible," said political commentator Harumi Arima. "Who would call an election now knowing that over 100 parliament seats would be lost, putting the party on the brink of collapse?"

Noda will wait until next summer to hold general elections together with upper house polls due in July, Arima added.

BRINKMANSHIP

In a sign of the opposition's deepening frustration, the upper house, which it controls, has refused to hold a session on Noda's speech following a non-binding censure motion against him passed by the chamber in the last parliament session.

The current session is due to last until November 30, and if the deficit funding bill is not passed by then the government could be pushed over a "fiscal cliff", and forced into draconian spending cuts and push the economy back into recession.

That prospect has drawn close scrutiny from ratings agencies Moody's Investors Service and Standard & Poor's.

The brinkmanship over the bond bill would backfire on the opposition rather than Noda, Arima said, as the prime minister could benefit from public criticism of his rivals' spoiling tactics and eventually pass the bill with some tweaks, without needing to call a general election.

"No government can manage the current public finances without the bill," Noda said, appealing for opposition support.

"If the situation is left as it is, administrative services could stall, which would seriously affect people's livelihoods and thwart efforts to revive the economy."

In the speech, largely summarising government policy, Noda vowed to tackle deflation and the yen's excessive strength, which is hurting the export-reliant country.

He also reiterated his resolve to protect Japanese territory and waters, an apparent reference to recent rows with China and South Korea over separate groups of disputed islets.

"Achieving relationships of trust with surrounding countries such as China, South Korea and Russia, with a comprehensive view, strengthens the foundations on which Japan and the whole region enjoy peace and prosperity," Noda said. "It is one of the grave responsibilities a country has to fulfill."

Noda said he would promote free trade deals such as the U.S.-led Trans-Pacific Partnership and others including one involving Japan, China and South Korea, with the aim of realising a Free Trade Area of the Asia-Pacific, while protecting national interests.

He also reiterated the government's vague promise to try to ditch nuclear power in the 2030s while promoting green energy, following the radiation crisis at the Fukushima nuclear plant triggered by last year's massive earthquake and tsunami. ($1 = 80.1650 Japanese yen)

(Editing by Tomasz Janowski/ Michael Watson and Simon Cameron-Moore)

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