Japanese Voters Give Abe Control of Upper House

Japan’s voters went to the polls yesterday to elect members to the upper house of that country’s legislature. Exit polls suggest that the ruling coalition led by Shinzo Abe has secured no fewer than 76 of the 121 seats contested. Mr Abe’s Liberal Democratic Party (LDP) and its partner in the ruling coalition, New Komeito, will now control 135 seats in the 242-seat upper house, NHK reports, As a result, Prime Minister Abe controls both chambers, a luxury no Japanese leader has enjoyed in six years. The question is, what does he do with his majorities?

After two decades of economic stagnation, he has proposed reforms that might or might not help, which the press dubbed “Abenomics.” The two :arrows” of te plan were a huge injection of cash into the economy by the Bank of Japan and a fat government spending package. Since he took office in December, the economy has grown 4%, and the stock market us up 40%. It seems like he’s onto something.

The question is whether the Japanese economy is finally in a position where it can grow and sustain that growth without government intervention. For this to happen, he needs to bring down trade barriers, raise tax revenues (if not rates) and deregulate parts of the economy that have had the political power to avoid such reforms until now (agriculture for one). With an aging population, Japan already has demographic headwinds holding it back making these changes all the more important.

Despite his control of the legislature, though, he lacks the 2.3 majorities needed to alter the constitution. Some analysts and many critics claim that is his real focus. And there is evidence that his nationalist rhetoric may foreshadow a change to the pacifistic nature of the Japanese constitution.

His nationalist rhetoric may play well at home, but in the region, it’s trouble. China and South Korea are both nervous about Japan’s military intentions, which Mr. Abe has increased. One doesn’t expect Japan to rearm and go in search of fights to pick, but he does make it hard for other powers in the region to be trusting of his intention no matter how noble. And in a region that includes North Korea, the world doesn’t need any extra grounds for concern.

Adding to these worries is the looming decision on restarting Japan’s nuclear power plants. Nuclear power is just a step away from nuclear weapons, and there is a significant part of the body politic in Japan that would be happy to see the end of fission there. At the same time, Japan has few energy resources of its own, so nuclear power has a fundamental appeal. Regardless of what he decides, he will upset many.

Japan needs to succeed for the region to succeed, and the region is, arguably, the most important part of the planet. For the first time in six years, Japan has a government that can legislate. Mr. Abe has made a start that appears to be working. Whether he can translate his short-term success into long-term growth remains to be seen. One wishes him well, but based on the track record of Japan in the last 20 years, the smart money isn’t placing a bet any time soon.