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Japan Diary


July 22, 2013

Abe's victory brings a stable government at least for three years

Abe's victory brings a stable government at least for three years
--and no need for populist nationalism--

Yesterday there was an election for the Upper House of the Diet. The ruling coalition of Liberal Democratic Party and Koumei Party took lion's share, thus establishing majority in both Houses of the Diet. For these six years the government always lacked in majority in the Upper House, and this prompted the annual change of prime ministers, paralyzing Japan's foreign policy.

Thus, Abe's victory means a stable government at least until next election (three years ahead at the latest), and he will not have to flatter the voters so much as the preceding unstable governments were forced to do. Japan will become a more reliable partner for neighbors. Remember that it was Abe (in his first term as prime minister) who made a surprise visit to China in 2006 to normalize the relations strained by his predecessor Koizumi's tough policy. And remember that it was the DPJ (Democratic Party) government which often took excessively hawkish stance in foreign policy out of inexperience and populism.

Abe started a drastic monetary easing dubbed as Abenomics to deter Japan from deflation; part of redundant money will go abroad, thus easing the shock emanating from "exit policy" of the U.S. and the EU. In case of Asian monetary crisis Japan will be able to replenish the market with dollar and yen, as Japan is one of the mainstays of the Asian international swap system (Chiang Mai Initiative).

Some people consider Abe as a dangerous nationalist, but he is neither a revanchist nor an expansionist. He wants to maintain the postwar status quo in Asia and guard the free and prosperous society (incidentally, his party is named "liberal" and "democratic"). He wants that the Self Defense Forces (in reality rather huge armed forces) be endorsed in the Constitution and be given more opportunity to take part in the U.N. peace keeping operations.

Abe is well aware that the U.S. plays the key role in Japan's security, therefore will not drag the U.S. into a provocative warfare. So far the Japan-U.S. alliance works well in guarding the post-war status quo in Asia including the Senkaku Islands, which are not "simple rocks", but an important symbol and bulwark for free navigation in the East China Sea, the only navigation route for South Korea's main ports.

In politics a victory often leads to disarray in victor's own ranks, as representatives of various vested interests start asserting their position. In Abe's case it will be several jingoistic advisers and newspapers, the farmers' union which opposes TPP (Trans-Pacific Partnership Agreement, a new Asian WTO) and the politicians who demand more public work money and more banking credits in their own electoral districts.

Yet Abe-san is much more experienced, embattled and modest than in his unlucky first term (2006-07). Let us have fingers crossed for his new start.

Comment

Author: Bruno | July 25, 2013 1:00 AM

Thank you very much for sharing your instructive views.
Probably due to lack of more profound knowledge I am a bit skeptical with regard to true and lasting benefits of a prolonged cheap Yen approach given the expected inflation.

It may be interesting to see in
what way such policy influences investments and production cost abroad and what the effects of more expensive imports will mean for the
average Japanese salaryman.

Of course, in the short term, investments in Japanese stocks may look more lucrative to the casual observer from abroad. Also profits generated outside of Japan will translate into higher Yen figures, thus benefiting the income statements of Japanese corporations, which in turn may positively influence the stock
indexes.

How much more absorbent export markets will be for products
of Japanese suppliers remains to be seen.

After all, Japanese big
corporations have not exactly been sleeping in the past years either.

However, I am confident that some lessons have been learned from the
collapse of the past bubble and that the same mistakes will not be
repeated. Hoping for miracles is legitimate for the desperate but not
quite realistic. Certainly, a stable, experienced and dedicated
government is a big plus to getting things right.

Best regards,

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