WRAPUP 2-Japan PM makes pitch as party struggles before poll

* PM Kan says cannot put off painful choices

* Surveys show falling support for ruling Democrats

* Democrats face prospect of seeking new allies
(Adds fresh PM quote, voter comments)

By Yoko Nishikawa and Benjamin Shatil

TOKYO, July 10 (BestGrowthStock) – Japanese Prime Minister Naoto
Kan urged voters to give his party a second chance in a weekend
election that could deliver a sharp setback to his government,
putting his job at risk and stalling efforts at fiscal reform.

Sagging support for the Democratic Party of Japan (DPJ),
which surged to power for the first time just last year, jumped
after Kan — a former civic activist and Japan’s fifth leader
in three years — replaced his indecisive predecessor last
month.

But ratings slipped after Kan floated the long taboo topic
of raising the sales tax to curb a public debt close to twice
the size of the nearly $5 trillion economy, and struggled to
persuade voters he had a clear plan for fixing Japan’s economic
woes.

Since then, Kan has stressed that no tax hike would occur
before seeking a mandate in the next lower house poll, which
must be held by late 2013, but argued that Japan could not put
off painful choices if it wants to avoid a Greek-style debt
crisis.

“Japan’s economy is 20 to 30 times bigger than that of
Greece and its public debt is huge, so no country in the world
could rescue Japan,” Kan told a crowd of voters sweltering on
Saturday under the hot sun in a popular shopping area of
western Tokyo.

“Japan itself must make sure it avoids collapse,” he said,
adding ordinary folk would suffer most if finances crumbled.
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See graphics:

PM support falls over sales tax:
http://r.reuters.com/myv63g

DPJ lead narrows over rival:
http://link.reuters.com/jev83j

Japan’s massive public debt:
http://r.reuters.com/sez92m

Upper house seats before poll:
http://link.reuters.com/tuv85m

More stories on the Japanese politics:
[ID:nPOLJP]
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The DPJ, which ousted its long-dominant rival last year
with pledges to cut waste, end bureaucrats’ control over
policymaking and spend more on consumers to boost growth, will
almost certainly run the government whatever the outcome of
Sunday’s vote because it controls the powerful lower house.

But the party needs a majority in the upper chamber to
avoid policy deadlock and begin taking steps to reduce a public
debt that is the worst among advanced countries.

NEEDING ALLIES, FACING CHALLENGE

Media surveys this week showed the DPJ would likely win
around 50 or even fewer of the 121 seats up for grabs in the
242-member chamber — well short of Kan’s target of keeping all
54 seats the Democrats have up for re-election.

That would deprive the DPJ and its tiny coalition partner,
the pro-spending People’s New Party, of a majority in the upper
house. The Democrats would be forced to seek new allies,
complicating the government’s ability to forge ahead with the
fiscal reform that Kan has put at the heart of his campaign.

It would also leave Kan vulnerable to a challenge from
party powerbroker Ichiro Ozawa — a critic of his sales tax
proposal — ahead of a September party leadership vote,
although few expect Kan to go without a fight.

Not all voters have been put off by the sales tax talk, and
indeed, surveys have shown many think a rise is inevitable.

“I agree with a sales tax rise and I think the sooner, the
better,” said Akiko Takita, a 63-year-old retired Tokyo
resident who voted for the DPJ last year and plans to do so
again.

“There should be less discussion and more action.”

But many others are having trouble finding a party to their
taste, with surveys showing a hefty chunk are undecided.

“I’ve looked at them all but there is no one I like,” said
event planner Osamu Sato, 32. “I’ll just decide on the day.”

The DPJ’s current coalition partner opposes raising the 5
percent sales tax any time soon, as do some potential allies.
Other opposition parties agree a hike is inevitable but would
probably be reluctant to help out the rival DPJ, which has not
yet mapped out any detailed tax reform proposals.
[ID:nTOE661014]

The 63-year-old Kan has called for non-partisan talks on
tax reform and said any rise in the 5 percent sales tax would
take at least two to three years to implement.

He is also touting a “Third Way” economic strategy that
would use tax revenues to target growth areas such as
healthcare and the environment, although many economist are
dubious.

The leaders of two potential partners, the pro-reform Your
Party and New Komeito, which partnered with the Liberal
Democratic Party until its ouster last year, have rejected the
idea of an alliance with the DPJ.

Analysts say they might change their tune later, but would
drive hard bargains if the Democrats fare badly.
(Additional reporting by Rika Otsuka; Writing by Linda Sieg)

WRAPUP 2-Japan PM makes pitch as party struggles before poll