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

Sun Dec 16, 2012 11:47pm EST
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By Linda Sieg and Tomasz Janowski

TOKYO (Reuters) - Conservative ex-premier Shinzo Abe got a second chance to lead Japan after his party surged back to power in Sunday's election and faces pressure to move swiftly to bolster a sagging economy and manage strained ties with China.

The Liberal Democratic Party's (LDP) landslide just three years after a crushing defeat appears more a damning verdict on its rivals' brief spell in power than an embrace of Abe's agenda or the party that had ruled Japan for most of the past 50 years.

The vote gave the LDP and its small ally a two-thirds majority in the lower house. It will usher in a government committed 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 spending to boost growth.

NHK public TV said on Monday the LDP had won 294 seats in the 480-member lower house. Its ally the New Komeito party won 31 seats, giving the two enough votes to overrule most matters in the upper house, where no party has a majority.

Executives of both parties discussed on Monday steps to pull the economy out of its fourth recession since 2000. Abe will meet his New Komeito counterpart on Tuesday to cement ties.

The prospect of overcoming the policy gridlock that has dogged successive governments for the past five years cheered investors, with stocks extending their month-long rally and the yen weakening further.

The yen fell to as much as 84.48 against the dollar, a 20-month low, while the benchmark Nikkei rose 1.6 percent. Bond prices eased in anticipation of economic stimulus.

A further increase in the central bank's bond-buying scheme is expected on Thursday, when the BOJ holds this year's last policy meeting, while markets also expect an extra budget worth up to 10 trillion yen ($120 billion).   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