Tue, Dec 16, 2014 - Page 5 News List

Japan’s Abe faces reform battle despite election win

AP, TOKYO

Despite an election victory that gave him up to four more years in power, Japanese Prime Minister Shinzo Abe still faces strong resistance to a promised economic and political overhaul.

In Sunday’s snap election, the conservative Liberal Democratic Party of Japan (LDP) — which has ruled for most of the post-World War II era — locked up a solid majority of at least 291 seats. About 35 seats were claimed by the LDP’s coalition partner, the Buddhist-backed Komeito party, giving the ruling bloc more than two-thirds of the 475-seat House of Representatives, the lower house of the Diet.

That majority will enable the coalition to override resistance in the upper house, but not necessarily the powerful vested interests and bureaucrats opposed to major reforms many economists say are needed to revitalize the economy.

Businesses are reluctant to sink their cash hoards into a shrinking home market, farmers are dead set on keeping their cushion of subsidies and tariffs, and voters remain leery of many of Abe’s plans — the election victory changes none of that.

Japan could gain significantly by boosting its productivity through labor reforms and improving business conditions for foreign companies, but such initiatives have made little headway.

“Nor has there been any progress in the government’s stated aim of deregulation,” Marcel Thieliant of research consultancy Capital Economics said in a commentary yesterday. “Unfortunately, we fear that reform progress will remain glacial in coming years.”

The solid majority for the ruling coalition does reduce the likelihood of challenges against Abe from within the LDP. That could allow him to put off the next election until as late as December 2018.

After his win on Sunday, Abe said his top priority was the economy, which fell back into recession after a tax hike in April.

“Economy first,” he told national broadcaster NHK, adding that he would also tackle other major issues, including national security.

The “Abenomics” blend of aggressive monetary easing, public spending and economic reforms has pushed share prices higher and weakened the yen, helping big exporters like Toyota Motor Corp. However, wages and business investment have remained sluggish, while inflation and growth have fallen short of the targets Abe set when he took office two years ago.

A quarterly survey of business sentiment released yesterday by the Bank of Japan showed a slight deterioration in the outlook for the coming months. Conducted after Abe delayed a sales tax hike that was planned for next year, but before Sunday’s election, the survey showed businesses anticipating slack demand and rising costs.

“Abenomics is still halfway through and I feel a strong sense of responsibility to push it further,” said Japanese Minister of Finance Taro Aso, who retained his seat in parliament.

Abe’s agenda includes labor market reforms and securing a proposed trans-Pacific trade agreement strongly opposed by the powerful farm and medical lobbies.

He successfully wagered that voters would stick with him despite the recession and qualms among many in Japan over Abe’s broader agenda, which includes restarting nuclear plants idled after the March 2011 Fukushima Dai-ichi nuclear power plant meltdown and expanding the country’s military role.

The Liberal Democrats held 295 seats before the election and fell short of forecasts that they could win as many as 320 seats.

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