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Geopolitics: The challenges facing ’s new government in 2013

Japan’s new prime minister, Shinzo Abe, is keen not to make the mistakes of his previous premiership when he lost the Upper House election and survived in the job for only one year after being elected in 2006. With Upper House elections coming up again in around six months, he plans to concentrate on the economy in the hope that his proposed measures will produce results by the time the Professor Dr electorate goes to the polls. Stefan Lippert

JAPAN’S political focal point of 2013 is the Upper House election which is expected to be held in July 2013. The new government of Prime Minister Shinzo Abe will do everything possible to ensure that the Liberal-Democratic Party (LDP) wins the election, with or without its coalition partner, the Buddhist party, New Komeito. Mr Abe has learned from his political failures. During his first tenure as prime minister, from 2006 to 2007, he lost the Upper House election in the national Diet, Japan's parliament. It Japan's Prime Minister Shinzo Abe is looking for results (photo:dpa) marked the beginning of the end of his short tenure and cast a shadow of public discontent To win the election, the LDP has to deal with over the LDP’s remaining two years in power. three challenges. No party has a majority in the Upper House. The First, Mr Abe is not popular with the electorate. LDP and New Komeito have 102 out of a total of He has admitted that his party’s victory in 242 seats; the Democratic Party of Japan (DPJ) December 2012 was more of a defeat of the main has 88 seats. The remainder are distributed opposition, the DPJ, than a win for his party. among other parties. Six are vacant. The LDP chose Mr Abe as its candidate because of his party connections and his ability to Three challenges balance its various internal factions. He is not Half the seats - 121 of the total - are to be seen as an executor of change. contested in the summer. This provides the LDP Second, surveys consistently show that the with an opportunity to gain the majority in the economy is what matters most to the electorate. Upper House and keep control over Japan until Mr Abe focussed on symbolic themes such as the the end of 2016, when the terms of the lower creation of a ‘beautiful Japan’ or history school house lawmakers will expire. books in his first term as prime minister in 2006.

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This did not go down well with the public and he any, attention. In some cases, journalists appear suffered a rapid loss of support. He has learned to have given up on critical evaluation of the from that experience. billions and trillions of yen involved. Some newspapers reported in mid-January 2013 Economic upswing that, as part of the stimulus package, a budget of Mr Abe is now putting the economy at the top of around US$700 million (60 billion yen) – his agenda, with a three-point strategy: enough to buy two new Airbus 380 superjumbos • Depreciation of the yen against the dollar, by – was earmarked for the upgrade of just two talking the currency military helicopters. down. The yen fell from Japanese households and 83 to the dollar on companies are famous December 15, 2012, the Instead of returning to fiscal for their thriftiness. But day before the election to solidity, Japan is expected to the general reaction to 89 to the dollar on further increase the debt level the rise in debt seems to January 15, 2013, a to 240, or even 250 per cent of be one of denial. decrease of seven per One problem is that the ‘ GDP this year cent large numbers, which • An inflation target of are expressed in yen and two per cent, achieved so look around 100 by flooding the economy times higher than the with money printed by equivalent figures in the to end dollars or euros, have the deflationary environment which has become practically incomprehensible to the large suffocated consumer spending and corporate majority. investments for two decades LDP politicians and supportive economists • Growth by debt-fuelled government spending frequently refer to the US$700 billion stimulus on infrastructure and defence with a massive package of the US government in 2008-09 as a stimulus budget for the current fiscal year, benchmark. ending on March 31, already passed by the government Nuclear energy The hope is that these measures will produce a But the population of the United States is significant, measurable economic upswing in the expected to grow from 320 million to more than short term until the Upper House election in the 400 million by 2050. In contrast, Japan’s summer. population is projected to shrink from 127 million to 90 million by 2050 and to 43 million Increasing debt by 2110. The LDP will spend hundreds of billions of The rapidly ageing and shrinking population will dollars to ‘kick start the economy’ in spite of the have to pay back a rapidly increasing mass of poor record of similar stimulus packages since public debt. the early 1990s. The third challenge for the LDP stems from its They have created a debt pile in Japan which is reluctance to introduce any reform or change that by far the highest in the developed world, far might cost votes. This includes Japan’s higher than those of Greece or Spain in terms of participation in the Trans-Pacific Partnership gross domestic product (GDP) per capita. (TPP) agreement. Instead of returning to fiscal solidity, Japan is The business lobby, which is largely in favour of expected to further increase the debt level to 240 free trade, is unlikely to overcome the massive or even 250 per cent of GDP this year. resistance to participation in the TPP from the Voices in politics and the media calling for an agricultural lobby and the healthcare sector, both end to further increases in debt receive little, if traditionally strong supporters of the LDP.

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The LDP has traditionally been in favour of Hashimoto, has no clear position on the nuclear nuclear energy, but it is avoiding any question. Mr Ishihara is a strict supporter of commitment in the field of energy policy. nuclear energy whereas Mr Hashimoto prefers a The reactivation of nuclear reactors will be left to phase-out plan by the 2030s. the new regulatory body, the Nuclear Regulation As a result, Japan’s energy policy will remain Authority (NRA), which mostly consists of pro- ambiguous for the years to come. No party will nuclear experts and bureaucrats. take the responsibility to make a clear-cut The restart of another reactor decision. Domestic before the forthcoming heavyweight players in election is unlikely as Mr the solar and wind Abe wants to avoid a The restart of another reactor energy business have public backlash. before the upcoming election is begun to take advantage Surveys indicate that unlikely as Mr Abe wants to of the generous feed-in- energy policy has a tariffs, so these medium priority for the avoid a public backlash subsidies are likely to electorate, and that the ‘ stay, providing huge majority wants to profit opportunities for abandon or reduce the alternative energy usage of nuclear power. producers. Japan will keep buying huge amounts of natural Nuclear disaster gas and oil on international markets to make up Mr Abe has already postponed a fundamental for the loss of nuclear capacity. decision on Japan’s energy strategy for 10 years, In particular, it will try to buy shale gas from the apparently speculating that the Fukushima US without signing a free-trade agreement such nuclear disaster of 2011 will be forgotten over as the TPP. time. Japan’s imports of natural gas and oil will keep The LDP has an unlikely supporter for its nuclear the decline of the yen in check. plans - its archrival, the DPJ, which has chosen Most observers assume a yen-dollar exchange Banri Kaieda, a former head of the Ministry of ratio of around 85-90 for 2013, a level that seems Economy, Trade and Industry (METI) and a to be acceptable to Japanese importers and strong supporter of nuclear energy, as its new exporters as well as foreign players such as the party leader. United States and the European Union. The third major political force, the Japan It also seems acceptable to Japan’s neighbour, Restoration Party of the former governor, South Korea, which the higher yen would hit Shintaro Ishihara, and Osaka mayor, Toru directly.

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