Japan's likely next PM won't yield in China row

TOKYO Thu Nov 15, 2012 11:18am IST

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TOKYO (Reuters) - The leader of Japan's main opposition party, leading in polls ahead of a general election next month, said he would do more to mend economic ties with China but would not yield in a territorial row with its giant neighbour.

Shinzo Abe, a former prime minister and head of the Liberal Democratic Party (LDP), also said the Democratic Party-led government is "irresponsible" for pledging to phase out nuclear power by the 2030s in the wake of the Fukushima disaster last year. That could lead some firms to relocate overseas, he said.

He also defended public works spending, which was a hallmark of his party's policies in more than half a century of nearly non-stop rule.

"We need to have economic policies that are stronger than what the current government is offering," Abe said in remarks to executives and media. "We need strong policies to end deflation, strong diplomacy and a strong defence to rebuild Japan."

Japanese Prime Minister Yoshihiko Noda is set to dissolve parliament's lower house on Friday, setting up a snap election for Dec 16.

Abe reiterated that he would call on Japan's central bank to ease monetary policy aggressively to end nagging deflation and weaken the yen, a prospect that has weighed on the currency in foreign exchange markets.

The yen fell on Thursday to a six-month low against the dollar. On Wednesday, Abe said the Bank of Japan should print "unlimited yen" to revive inflation and he followed that up on Thursday by calling on the central bank to set interest rates at zero, or below zero, to boost lending.

Strength in the yen has been a problem for small- and medium-sized enterprises, because it reduces their competitiveness and weighs on economic growth, Abe said.

The LDP leader said he would not yield in a territorial dispute with China over a group of islands known as Senkaku in Japan and Daioyu in China.

He said he would increase the Japanese Coast Guard budget to ensure that China does not create a situation where it can say that it effectively controls the islands.

However, Abe also touted his past efforts to improve economic ties with China when he served as premier in 2006-2007 and said he would do more to mend economic ties in the future.

"When I was prime minister, I visited China and helped foster a strategic relationship based on our close economic ties," Abe said.

"This economic relationship is essential to both countries and shouldn't be damaged."

The territorial dispute prompted a boycott of some Japanese products in China, leading to a loss of exports. (Editing by Michael Watson and Neil Fullick)

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