Japan warns over debt default

The new Japanese Prime Minister, Naoto Kan, warned that the country could default on its borrowing unless it cuts its massive public debt, which is already twice the size of the nation's GDP. Mr Kan, who took over last week, has made tackling the debt a top priority.

"We cannot sustain public finance that overly relies on issuing bonds," he told parliament. "As we can see in the eurozone confusion that started from Greece, there is a risk of default if the growing public debt is neglected and if trust is lost in the bond market." Mr Kan spoke hours after his banking minister, Shizuka Kamei – an advocate of big spending – said he would quit, thereby making reform more likely. Mr San is widely expected to double Japan's sales tax, which currently stands at 5 per cent.