Economic woes ensure more deadlock

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The Independent Online

It looks as though this weekend's election will return Shinzo Abe and his Liberal Democratic Party to power in coalition with its long-time partner, the Komeito. Depending on the actual seat count, the LDP may well need to add smaller parties to its coalition in order to get a stable majority in the lower house, and it will certainly need to incorporate or co-operate with smaller parties in the upper house to pass legislation. Still, the LDP will be in a strong position for setting policy directions.

What will this mean for Japanese politics and policy? Politically, it will be one more confirmation of the deadlock and partisan fragmentation of the past 20 years. The concept of a political party is a weak one these days, with significant defections, marriages of convenience and opportunistic behaviour. Unless Japan's core economic challenges are solved there is no clear prospect for improvement. Unfortunately, Japan's economic woes cannot be solved without significant pain for voters, who naturally blame politicians for the problems.

In terms of policy, the LDP and the DPJ broadly agree on key issues such as tax, fiscal, pension and healthcare reform, and trade policy. The big differences between them are found in foreign policy and approaches to deflation. An Abe government can be expected to worsen relations with most neighbours, threatening to complicate not only Japan's regional relations, but also US objectives in East Asia.

The other big difference is Abe's desire to pressure the Bank of Japan to address deflation more aggressively. It is not clear he will follow through on his threats, but the Bank of Japan will probably become much more forward-leaning in the deflation fight. With luck, this will break the back of deflation; at the least, it will lead to a depreciation of the yen from levels exporters find crushing.

William W Grimes is a research associate of the National Asia Research Programme