The Japanese prime minister said he wants 2011 to be the year Japan opens up to rest of the world and called Tuesday for debate on raising the sales tax to prop up ailing finances as the country's population shrinks and ages.
To revive its economy, Japan needs to embrace free trade and reform its protected farming sector, Prime Minister Naoto Kan said in a nationally televised press conference to set his agenda for the new year.
"I want this to be Year One of opening up the country" of the modern era, Kan said.
Kan asked for cooperation from his political opponents, saying the public has been disappointed by political squabbling that has paralyzed parliament. He also called for the eradication of "money politics," a reference to the series of scandals that have plagued Japanese politicians over the years.
He also raised the possibility of increasing the consumption tax to shore up the country's finances, a potentially politically poisonous notion. Support for the ruling party plunged and it lost badly in July's upper house elections after he suggested that Japan needs to raise its 5 percent sales tax to as high as 10 percent.
"The need for a discussion about social welfare and the resources required, including tax reform and raising the consumption tax, is clear to everyone," he said.
Japan's economy is entering its third decade of stagnation, and last year China overtook it to become the world's second-biggest economy. Last month, the Cabinet approved a record 92.4 trillion yen ($1.11 trillion) draft budget aimed at creating jobs and reviving growth.
At the same time, the country faces a looming demographic squeeze. Last year, its population fell by a record 123,000 people, and stood at 125.77 million as of October. Young people are waiting longer to get married and choosing to have fewer children because of careers and economic concerns.
Japanese aged 65 and older make up about a quarter of the country's current population. The government projects that by 2050, that figure will climb to 40 percent.
In office since last June, Kan also said he wanted to work to decrease the burden of the U.S. military presence in the southern island of Okinawa, which hosts more than half the 47,000 American troops based in Japan under a security pact with Washington.
Kan has said he would stick to an agreement with the U.S. to move a controversial U.S. Marine base to a less crowded part of Okinawa - a plan that faces strong opposition from local residents who want the facility removed from the island entirely.