Speaking on Monday, Japan’s prime minister-in-waiting said the central bank should consider the election result when it meets on Wednesday to discuss policy. Mr Abe and his Liberal Democratic party campaigned on a platform to force the BoJ to introduce more aggressive monetary easing.
“It is very unusual for monetary policy to be a focus of attention in an election. But there was strong public support for our calls to beat deflation,” Mr Abe said. “I hope the Bank of Japan takes that into account [this week].”
A formal parliamentary vote is expected to approve Mr Abe as prime minister on December 26. He said that once in office, he planned to instruct ministers to produce a joint statement with the BoJ to set a 2 per cent inflation target, which is double the central bank’s current benchmark of about 1 per cent.
Ahead of Sunday’s poll Mr Abe had criticised the BoJ for not being more aggressive in its monetary policy. Early in the election campaign he urged it to introduce “unlimited” easing, to help revive the economy which dipped into recession days just before the vote.
Sunday’s election, which radically redrew Japan’s political map for the second time in three years, has handed Mr Abe and the LDP a decisive supermajority and enough support to follow through on campaign pledges to stimulate the economy and beat deflation with measures, partly based on BoJ monetary policy.
“The Japanese economy . . . is facing a critical situation,” Mr Abe said on Monday, pledging to form a “crisis beating cabinet”, and move quickly to implement a supplementary budget.
“It needs to be a supplementary budget that can beat deflation,” Mr Abe said, suggesting that extra budget could be sizeable.
Business welcomed the LDP victory. Hiromasa Yonekura, chairman of the influential Keidanren lobby group, whose members include Japan’s biggest companies, said it reflected “people’s expectations about the LDP’s ability to rebuild the economy” as well as “their harsh assessment of the DPJ government”.
Separately Mr Abe, who is known for his hawkish views, said he aimed to improve ties with China strained in recent months by a territorial dispute.
“The relationship between Japan and China is the most important issue in foreign and security policy in the 21st century,” he said.
“China is indispensable for Japan’s economic growth. It is necessary for the development of Asian countries that Japan and China maintain good relations,” Mr Abe said.
“However, many countries that share borders have many problems and there is a need to have the wisdom to prevent political issues from spilling over into the economic relationship,” he said, referring to violent riots in China this summer, after the Japanese government nationalised islands that are claimed by both countries.
With all races decided on Monday, the LDP took 294 seats in the 480-seat lower house – almost as many as the now humiliated Democratic party (DPJ) won in 2009 when it ousted the LDP, ending five decades of nearly uninterrupted rule by the party.
Together with its smaller partner, Komeito, the Liberal Democrats will control 325 seats, more than the two-thirds majority needed to pass legislation opposed by the Diet’s upper chamber, where no party holds a majority. Gridlock between the two houses helped stymie the DPJ on issues from deficit financing to election reform, eroding its credibility with voters.
The Nikkei stock average rose as much as 1.7 per cent, briefly topping 9,900 for the first time in more than eight months, before closing 1 per cent above Friday’s close. The yen weakened slightly to Y84 per US dollar.
Q. The Liberal Democratic coalition won in a landslide. Can it pass whatever legislation it wants to now?
A. Theoretically, yes. The LDP won a big majority on its own and, with its junior partner Komeito, took 325 of the lower house’s 480 seats – more than the two thirds needed to override opposition from the legislature’s upper chamber, where no party holds a majority, writes Jonathan Soble. But Shinzo Abe, the LDP leader, has said he hopes not to invoke his supermajority, and to work with opposition parties instead. He may fear a voter backlash ahead of an upper-house election slated for next summer. Keeping Komeito onside could be tricky too: on the most controversial issues such as revising Japan’s pacifist constitution, the Buddhist-backed party is more skittish than the LDP.
Q. When do Mr Abe and the LDP actually take over?
A. A special session of parliament is being planned for December 26, where the new LDP-majority legislature will select Mr Abe as prime minister. Later, he and his cabinet will attend a ceremonial commissioning by the emperor. Until the special session, Yoshihiko Noda, the outgoing Democratic party leader, will remain prime minister.
Q. Mr Abe resigned in 2007, and revealed later that he had been suffering from ulcerative colitis, a type of inflammatory bowel disease. What is the state of his health now?
A. There is no cure for ulcerative colitis, but depending on its severity the disease can often be managed with medication. In a news conference on Monday, Mr Abe said: “I am controlling it sufficiently with new drugs, and my doctor has given me a clean bill of health.” He added that he would “give priority to maintaining my health and rest when necessary.”
Q. Twelve parties were competing for seats. Which one is Japan’s official opposition now?
A. The Democratic party (DPJ), in charge since 2009, was reduced to 57 seats from 230 before the election. That is just three more than the populist Restoration party, which was formed less than three months before the campaign. But the DPJ is still the biggest party in the upper house, with 104 seats to the LDP’s 86. The Democrats’ future could hinge on whether they can rebuild their public image before next summer’s upper-house elections; a defeat like the one on Sunday could wreck it. Restoration, meanwhile, says it will work with the LDP on a case-by-case basis – supporting, for instance, any effort to make Japan’s pacifist constitution more hawkish.
Q. The LDP criticised the outgoing government’s decision to phase out nuclear power before 2040. It also wants to restart reactors that have been shut down for safety inspections after last year’s Fukushima accident. Is it back to normal for the nuclear industry?
A. The LDP victory is good news for electric utilities and nuclear-plant builders. But restarting reactors – all but two of 50 are now shut down – will take more than an atomic-friendly central government. Local politicians and a new national safety regulator will have to sign off. And the facts on the ground keep changing: even as the election campaign unfolded, geologists were looking under idled reactors for potentially dangerous earthquake faults, finding at least one that could force a plant to be decommissioned.
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