Tokyo - Japanese Prime Minister Taro Aso on Monday said he would put a priority on the nation's economic recovery and an enhancement of the Japan-US alliance while mounting a challenge to the political opposition.

Aso, who assumed his post Wednesday, delivered a rare policy speech in parliament, where he confronted the opposition Democratic Party of Japan (DPJ) and called on it to hold debates on urgent issues.

The 68-year-old prime minister pledged a three-year plan to prop up the economy in the short term, achieve a government budget surplus in the medium term and institute reforms for long-term economic growth.

Aso urged the opposition, which controls Japan's upper house, to pass an emergency budget to help cope with rising energy costs. He was expected to call snap elections if the DPJ shoots down the budget.

The premier, who took the helm of the ruling Liberal Democratic Party (LDP) this month, pledged to cut income taxes by March in a bid to boost consumer spending to draw Japan back from the verge of recession.

The premier also vowed to tackle terrorism, climate change, poverty and territorial disputes with neighbouring nations.

On North Korea, Aso pledged to help resolve the nuclear standoff with the Stalinist nation as well as bring back Japanese citizens who were abducted by North Korean agents in the 1970s and '80s. He said Japan would also seek to normalize relations with Pyongyang.

Addressing Japan's assistance in US-led wars despite public opposition, Aso said the country had no choice as a member of the international community other than to continue a refuelling mission in the Indian Ocean for US-led anti-terrorism operations in Afghanistan.

The opposition DPJ advocates a UN-centred foreign policy, which Aso, an advocate of a more assertive Japanese role in international politics, dismissed in favour of siding with the United States.

Earlier in the day, the government submitted to parliament a bill to extend a temporary law authorizing the unpopular refuelling mission for one year through January 2010.

Since the opposition took control of the upper chamber, the House of Councillors, the government has experienced difficulties in passing legislation. The DPJ is also calling for the lower house to dissolve at an early date to hold a general election.

Aso's LDP enjoyed an almost uninterrupted rule since 1955.

On domestic policies, Aso said his government would make a "necessary review" of the health insurance programme for seniors 75 and older, which has come under fire for placing a heavier financial burden on some elderly people with low incomes.

Aso also apologized for comments made by his transport minister, Nariaki Nakayama, calling them "inappropriate as a minister."

Nakayama stepped down Sunday, five days after his appointment, over a series of remarks that included calling the nation's largest teachers union Nikkyoso a "cancerous tumour." (dpa)