Kaoru Yosano signaled he would urge continued restraint in the government new bond issuance in future budgets, underlining his reputation as a fiscal hawk and reinforcing the need to reduce a public debt that is twice the size of Japan’s economy and the highest among industrial nations.

“It’s reckless to believe that Japan can continue to go on with the current (fiscal) situation for years,” Yosano said.

However, taking action on the debt is proving to be difficult for Prime Minister Naoto Kan, who took office last June and has staked his career on fiscal reforms. The opposition has refused to co-operate and is piling pressure on the unpopular leader to call a snap election.

Japan’s public debt is running at around $10 trillion, the result of years of government spending to try to boost the economy following the bursting of a property bubble in the late 1980s.

Japan’s inability to put a lid on the rising public debt prompted Standard & Poor’s to cut Japan’s credit rating in January and warnings from other ratings agencies, including Moody’s Investors Service.

S&P said the government lacked a coherent plan to tackle the debt load, while Moody’s said the country needed comprehensive tax reform to bring its debt under control.

Markets are not too worried for now about Japan’s ability to finance its debt because 90 percent of government borrowing is financed by Japan’s ample domestic savings of some 1,400 trillion yen ($17 trillion).

But Yosano, appointed in a cabinet revamp in January, is the latest voice warning that time is running out for the government to tackle the issue.

He said the government and the central bank need to ensure that financial market trust in Japan’s debt management is restored.

“I’m always thinking about restraining bond issuance in compiling the state budget,” he said when asked if the government would aim to cap new bond issuance at 44 trillion yen in the fiscal year beginning in April 2012, as it did for the fiscal 2011/12 budget now being debated in parliament.

But that is no easy task given that social welfare costs are estimated to rise by more than 1 trillion yen each year due to the rapid ageing of Japan’s 120 million population.

Although Yosano is not tasked with direct responsibility for drawing up annual budgets — that is the job of the finance minister — he is leading an effort to reform social welfare and the tax system as the government confronts the need to support a fast-ageing society.

Kan’s cabinet aims to set out a road map in June to fix Japan’s creaking social welfare system, which could include the extent and timing of hiking the country’s consumption tax of 5 percent, seen by analysts as an essential ingredient for any plan to bring down the debt pile.

However, raising the tax is an issue successive governments have discussed but failed to turn into action, even though opinion polls have shown public support for a higher tax, also known as the sales tax.

“I think there is no doubt at all that the consumption tax needs to rise,” said Julian Jessop, chief international economist at Capital Economics in London. “But there doesn’t seem to be a lot of enthusiasm for that in the government as a whole. So I think it’s a big problem.”

But the chances of the government making much headway in the reforms are fading with Kan battling to keep his job amid sliding support rates and growing calls, including within his own party, for him to step down and break a deadlock in a divided parliament.

Indeed, Jessop said that Yosano may sound hawkish in his comments, but he questioned how far the lawmaker was willing to push the issue.

“I’m slightly skeptical that Yosano’s hawkishness really amounts to much and if he is actually willing to advocate an early hike in the consumption tax, if necessary an early election, to get the mandate required,” Jessop said.

Kan is now struggling with the more immediate task of passing a workable budget through parliament.

The $1 trillion budget for the year from April is set to be passed, but opposition parties that control the upper house have refused to help pass the bills needed to implement it, including one to allow issuance of deficit-financing bonds.

Failure to pass budget-related bills could cause a shutdown of parts of the government within months, similar to what happened in the United States in the 1990s, and increase the chance of a further downgrade of Japan’s credit rating.

Yosano did not offer any ideas on how he hopes to break the impasse but said he strongly believes that the opposition Liberal Democratic Party, to which he once belonged, will eventually cooperate in passing the bills to avoid any impact on the economy or Japanese.

He also shrugged off calls from some lawmakers for the Bank of Japan to buy more government bonds to prevent bond yields from spiking on concerns over Japan’s ballooning public debt.

“Asking the BOJ to buy more government bonds would be the most degrading way of guiding fiscal policy,” Yosano said.

“The government should not rely on such things in guiding fiscal policy.”

The BOJ last year cut interest rates effectively to zero and set up a 5 trillion yen pool of funds to buy assets ranging from government bonds to private debt, aiming to support an economy fragile from the global financial crisis and to pull Japan out of deflation.

In addition to buying bonds with the asset buying fund, the BOJ spends 21.6 trillion yen per year to purchase long-term Japanese government bonds.

The central bank has resisted calls from some lawmakers to boost that amount to keep bond yield rises in check, saying doing so could fuel a market perception it is monetising debt and so backfire by putting pressure on yields to rise.

Yosano, an advocate of BOJ independence who does not share the stance of other lawmakers to pressure the central bank into easing monetary policy further, sides with that view.

Known as an expert on fiscal policy, Yosano held finance and economics portfolios in the former LDP-led government, which was ousted by the Democratic Party in a 2009 election.

Since quitting a small opposition party to join the cabinet in January, he has repeated dire warnings about Japan’s fiscal health and pitched his position that the sales tax must be raised to meet the constantly rising costs of supporting a rapidly ageing population.