Sadakazu Tanigaki, leader of the Liberal Democratic Party (LDP), also said Kan’s party needed to compile a plan on social security reform that specifies the extent and timing of a sales tax hike before it can join multiparty talks sought by Kan.

Kan faces tough battles in a session of Parliament starting next week to debate the 2011/12 budget as opposition parties, emboldened by the government’s lackluster support ratings, threaten to use their majority in the upper house to block bills.   Kan’s ruling Democratic Party of Japan can enact the 92.4 trillion yen ($1 trillion) budget because it has a majority in the powerful lower house, but the opposition-controlled upper house can block laws needed to carry out the spending.

Tanigaki told Reuters in an interview that it would be hard for the LDP to agree to pass legislation for tax reform and a bill to raise debt for spending. “The lax campaign manifesto needs to be put behind to prepare the budget for next fiscal year,” he said.   “The manifesto is a failure. (The ruling party) has failed in its plans for a big government with smaller funds.” 

The DPJ ousted the long-ruling LDP in 2009 with promises to put more money in the hands of consumers and cut wasteful spending, but has since struggled to come up with the finances to fund pledged policies such as allowances for families with children.

The head of the second-biggest opposition party, New Komeito, said the party would not rule out cooperating with the government on specific proposals but had no plan for now for a future coalition with the DPJ, signaling cumbersome policymaking at best.

Tanigaki reiterated the LDP’s push for Kan to call an early election, although many analysts say a poll is unlikely for now, given that the DPJ would almost certainly lose seats.

The opposition has also raised the bar for Kan to tackle welfare reforms including debate on the politically sensitive sales tax, which at 5 percent is one of the lowest among major economies.

Kan has staked his political career on restoring faith in the social security system and raising the sales tax to finance caring for the rapidly ageing population but his party is also divided on how to proceed with reform.

The LDP is in favor of raising the sales tax but Tanigaki said the government and the DPJ must first present a clear plan as a sign of commitment before his party can take part in the multiparty talks proposed by Kan.

“There needs to be trust, or otherwise there will be doubts they will back off again and then there will be no talks,” Tanigaki said.

Kan floated the idea of raising the sales tax when he took office last June, but toned down his comments after the DPJ lost an upper house election the following month.

“It’s absurd for them to spend money on populist policies and then call on us to figure out how to deal with the consequences.”

While Kan’s appointment of fiscal hawk Kaoru Yosano as economics minister last week was perceived as a signal of Kan’s resolve to rein in public debt twice the size of the $5 trillion economy, Tanigaki was unimpressed.

Yosano was a long-time member of the LDP before bolting to set up a new tiny party last year after the LDP lost power. 

“What Mr. Yosano has been saying contradicts the DPJ’s policies so we will have to see how he sees this ... and how his appointment will affect their campaign manifesto,” he said, stopping short of calling for a censure motion against Yosano in the upper house.