Japan's next PM Abe must deliver on economy, cope with China

Sun Dec 16, 2012 3:18pm EST
 

By Linda Sieg

TOKYO (Reuters) - Japan's hawkish ex-premier Shinzo Abe will get a second chance to run the country after his conservative Liberal Democratic Party (LDP) surged to power in Sunday's election, but must swiftly move to bolster the sagging economy while managing strained ties with China.

Abe, whose party won by a landslide just three years after a crushing defeat, was expected on Monday to meet Natsuo Yamaguchi, the leader of the small New Komeito party, to cement their alliance and confirm economic steps to boost an economy now in its fourth recession since 2000.

The victory by the LDP, which had ruled Japan for most of the past 50 years before it was ousted in 2009, will usher in a government pledged to a tough stance in a territorial row with China, a pro-nuclear energy policy despite the 2011 Fukushima disaster and a potentially risky recipe for hyper-easy monetary policy and big fiscal spending to boost growth.

Projections by TV broadcasters showed that the LDP had won at least 291 seats in the 480-member lower house, while the New Komeito party took at least 29 seats.

That gives the two parties the two-thirds majority needed to overrule parliament's upper house in most matters, where they lack a majority and which can block bills. The "super majority" could help to break a policy deadlock that has plagued the world's third biggest economy since 2007.

Markets have already pushed the yen lower and share prices higher in anticipation of an LDP victory and Abe's economic stimulus. The two-thirds "super majority" could boost share prices and weaken the yen further.

Prime Minister Yoshihiko Noda's Democratic Party of Japan (DPJ) was crushed, forecast to win just about 56 seats - less than a fifth of its showing in 2009, when it swept to power promising to pay more heed to consumers than companies and pry control of policies from bureaucrats.

But voters deemed the pledges honored mostly in the breach and the party was hit by defections before the vote due to Noda's unpopular plan to raise the sales tax to curb public debt already more than twice the size of the economy.   Continued...

 
Japan's main opposition Liberal Democratic Party's (LDP) leader and former Prime Minister Shinzo Abe delivers a speech at Akihabara electronics store district in Tokyo December 15, 2012, on the last election campaign day ahead of Sunday's general election. REUTERS/Yuriko Nakao