On Friday, Japan's new prime minister, Naoto Kan, vowed to tackle fiscal reform, as banking minister Shizuka Kamei resigns over policy disagreements.

The banking minister’s resignation was announced early Friday and Chief Cabinet Secretary Yoshito Sengoku will take on the post for now. The minister heads the tiny coalition party and likes big spending.

However, analysts say the minister’s resignation improves the chances that Kan can forge ahead with efforts to address the country's huge debt.

In his first policy speech to parliament as premier, Kan said Japan risks default if it neglects its rising public debt and loses market trust.

[Naoto Kan, Japanese Prime Minister]:
“Japan is currently facing a difficult situation, the worst fiscal situation in the developed countries. We cannot sustain public finance that overly relies on issuing bonds. As we can see confusion in the euro zone 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.”

Kan faces the urgent task of keeping economic recovery on track.

[Naoto Kan, Japanese Prime Minister]:
"We have an immense amount of debt and resolving it in a day is difficult. That is why we need to have drastic reform from now in order to obtain fiscal health."

Kan said the government would stick to its plan to craft a medium-term fiscal framework by end of June.

How aggressively Kan can implement fiscal reforms will depend on the results of an upper house election that his Democratic Party must win to smooth policymaking.