TOKYO (AFP) –
Japan's government is ready to add to the country's already sky-high public debt in the face of slumping tax revenues, Finance Minister Hirohisa Fujii said Tuesday.

Japan faces a "significant" budget deficit for the current fiscal year through March 2010, Fujii told a news conference, blaming the fallout from the global economic downturn.

In such a situation, Tokyo "should not hesitate to issue new bonds" to cover the deficit, he added.

Japan's centre-left government, which took office last month, has made a number of ambitious fiscal pledges, including expanded childcare allowances and free high school tuition.

It is freezing spending of about 2.93 trillion yen (32 billion dollars) from its predecessor's extra budget of 14.7 trillion yen for this year as part of its war on waste in the public sector.

But analysts say the government will need to borrow more money if it is to meet its campaign goals, adding to Japan's mountain of public debt -- already the highest among major industrialised nations.

In an interview with the Nikkei published Tuesday, Fujii said Japan's new bond issuance may top 50 trillion yen (552 billion dollars) for the first time ever in the current fiscal year.

Tax revenue may fall below 40 trillion yen for the first since fiscal 1985, he indicated.

It would be the first time bond issuance has exceeded tax income since 1946, when Japan was rebuilding from the ashes of World War II, the Nikkei said.

The Japanese government had earlier estimated that this fiscal year's new bond issuance would be worth around 44 trillion yen, already a record for the debt-ridden nation, which has launched a series of economic stimulus measures.

Stimulus spending measures are expected to push Japan's public debt up to about 200 percent of GDP in 2010, The Organisation for Economic Cooperation and Development said last month.

Japan's crawled out of a year-long recession in the second quarter of 2009, but exports and factory output are much lower than before the global financial crisis began and unemployment is close to a record high.