WASHINGTON (AFP) -- President Barack Obama insisted Friday that mandatory government budget cuts set to kick in on March 1 -- known as the sequester -- were not "inevitable."

The cuts to defense and domestic spending were mandated in an agreement between Obama and his Republican foes to end a previous budget battle.

"I never think that anything is inevitable, we always have the opportunity to make the right decisions," Obama told reporters following a White House meeting with visiting Japanese Prime Minister Shinzo Abe.

"Hope springs eternal."

The consequences of the threatened sequester were supposed to be so punishing that Democrats and Republicans would have no choice but to reach a deal to reduce the deficit.

Obama also attempted to reassure financial markets in case the cuts do go forward.

"Unlike issues like the debt ceiling, the sequester going into effect will not threaten the world financial system, it's not the equivalent of the US defaulting on its obligations," Obama said.

"What it does mean though is that if the US is growing slower, other countries are growing slower."

Obama wants to use a "balanced" mix of spending cuts and tax revenue increases achieved by closing loopholes used by the wealthy to cut the US deficit, and says he will not sign a bill that harms the middle class.

Republicans, who lost a previous showdown with Obama over raising tax rates for the rich, say the debate over hiking taxes is closed.

They say they are willing to close loopholes, but only in the context of a sweeping reform of the tax code, and maintain that Obama wants to use proceeds from any immediate revenue rises for more bloated government spending.

Hundreds of thousands of public employees and private contractors are threatened by the cuts.