Shinzo Abe’s Landslide Victory Could Be A Turning Point For Japan

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Shinzo Abe’s Liberal Democratic Party (LDP) won 65 out of 121 contested seats in Japan’s upper house yesterday, giving Japan its first strong ruling party after six years of political deadlock. This election gives the LDP control over both houses of government, nearly enough power to amend the constitution, and a mandate to enact far-reaching reforms.

Shinzo Abe's Landslide Victory Could Be A Turning Point For Japan

Abenomics given the people’s seal of approval

One of the first decisions that Shinzo Abe will need to face is whether or not to increase the consumption tax meant to address Japan’s massive government debt. The tax is currently slated to rise incrementally from 5 percent now to 10 percent in 2015. Following his election Shinzo Abe said, “It’s going to be a very tough decision. I don’t want to miss a big chance to eradicate 15-year-long deflation.”

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The BANK OF JAPAN (TYO:8301) has been printing money at a fast clip, saying that it would double the country’s monetary supply under a policy that many are calling Abenomics. Under Shinzo Abe’s inflationary policies the Yen has lost a quarter of its value, making Japanese exports more competitive and giving domestic growth a much needed jolt. Even if the impact of these changes hasn’t yet hit most voters, the LDP is taking the victory as an endorsement to continue these policies.

Abenomics has also proven to be popular with financial analysts. The BANK OF JAPAN (TYO:8301)’s Takehiro Sato was optimistic about Japan’s continued recovery, and analysts from Citigroup Inc (NYSE:C) have predicted 4.3 percent sequential growth, a great improvement over most of the last decade.

Shinzo Abe may end six decades of Japanese pacifism

Aside from his economic plan, Shinzo Abe has made his name as a strident Japanese nationalist, and some people wonder if the LDP victory could mean an end to Japan’s pacifist stance.

Pacifism has been a part of the Japanese constitution since the end of the Second World War, a concession to demands made by the US which was occupying Japan at the time. This stance has gone unchallenged for much of Japan’s post-war history, but that could be about to change.

Shinzo Abe is still short of the two-thirds majority necessary to change the constitution, but he is close enough that he may be able to close the gap by bringing in other nationalistic parties. If the provision were removed from the constitution, Japan would be free to expand the size of its military and buy weaponry capable of projecting its power into China or Korea, both of which still have territorial disputes with Japan.