Ensuring political stability

In the elections for the House of Representatives of the Diet (Lower House) in Japan held on December 14, Prime Minister Abe Shinzo’s coalition cruised to a big election win capturing two-third majority. This landslide victory gives a huge opportunity and a strong hand to the Abe administration to push through legislations through the Diet.

This it did by sticking to reflationary economic policies as well as pursuing the kind of muscular security policies that has been one of Abe’s hallmarks of foreign policy stance. The ruling Liberal Democratic Party and junior coalition partner Komeito captured more than 317 seats that constitute a two-thirds majority.

What does this victory mean to the Abe administration as an immediate advantage, besides providing political stability to a country that has suffered from a spell of floating prime ministers at the helm, resulting in policy paralysis? The newly-earned majority will allow the Abe administration to pass bills into law through a second vote in the Lower House should the Upper House (House of Councillors) vote down that legislation.

While the LDP won 291 seats, Komeito grabbed 35. The Democratic Party of Japan took 73, increasing from 62 seats before the Diet dissolution, while the Japan Innovation Party won 41. In the December 2012 Lower House election, the ruling coalition had won 325 seats. That time, the LDP-Komeito coalition snatched back power from the DPJ.

The voter turnout was low at 52 per cent because of heavy snow. This was a historic low since the end of World War II, breaking the previous record of 59.32 per cent recorded in 2012 election. In seeking a fresh mandate and obtaining people’s endorsement, Abe is now expected to carry on his “Abenomics” economic policies when his third administration is launched on 24 December.

Increasing the consumption tax from 5 to 8 per cent from April 1,2014 raised a controversy as it depressed consumer spending and thereby negatively impacted the economy. The same tax was scheduled to be further raised to 10 per cent from October 2015. This time, Abe sought voters’ verdict on his decision to delay an additional increase for one and half years, as well as on Abenomics.

Now, the majority mandate is a public nod to the administration to implement the economic measures further. When Abe returns to form the cabinet on December 24, the immediate focus is likely to draw up measures against sluggish consumption and the rapidly weakening the yen.

The ordinary Diet session is likely to be convened in early January 2015. Abe would aim to pass through crucial bills to stimulate the sluggish economy as well as push for legal arrangements that would allow the nation to exercise the right of collective self-defence. His term as LDP president expires in September and if he is able to sail through the bills as planned, his chance to secure another term would have been improved.

Political footing
Unless the lower house is dissolved, Japan is unlikely to see another national election until a House of Councillors poll to be held in the summer of 2016. That would mean Japan would have a much desired spell of political stability, ensuring continuance in both domestic and foreign policies. The resignation of the two female ministers during his second innings was just an aberration as Abe now cements his political footing with this massive win.

The period between 2006 and 2012 was rather unusual as Japan saw a new prime minister every year, leaving the country mired in stagnation and dysfunction. Abe signalled that retooling Japan’s economy with painful structural reforms must take a back seat to reviving growth, even before Japan went to the hustings. His focus was on curbing the government’s runaway debt to finding ways to stimulate the economy by putting more money in the hands of the people.

Maintaining government spending and massive yen-printing by the Bank of Japan, besides putting off thorny economic reforms could mean Japan is left with an ever growing debt pile. Such an approach could mean little improvement in the economy’s long-term growth potential. Japan’s seemingly endless postponement of reform could be calamitous and lead to a collapse in the yen and uncontrolled inflation.

The question that begs an answer now, will Abe continue his reforms agenda with focus on the first two “arrows” of the “Abenomics” – stimulus spending and money printing – even with a absolute majority with little enthusiasm for the elusive third arrow of deregulation and reform? During the campaign trail, Abe remained committed to all three arrows, but there was no mention of structural reforms in hisparty’s platform that emphasised on economic recovery. The “third arrow” of reforms entails politically sensitive areas such as labour market deregulation and an overhaul of the highly protected farm sector.

The positive side of Abenomics has been that it brought about the depreciation of the Japanese currency, sending stock prices soaring. The employment situation also improved, with wages having entered an upward phase. The flip side of the policy package, such as widening gaps between major companies and small and midsize enterprises, as well as economic disparities between urban and rural regions, and rising import costs, are big question marks that the new administration needs to address.

Other major areas of focus of the new administration would be Japan’s participation in negotiations over the Trans Pacific Partnership free trade agreement and reviewing the interpretation of the Constitution concerning limited exercise of the right of collective self-defence. In the foreign policy front, one can expect an element of activism with muscular content in which India-Japan ties could find a special role.