Ena‘abe’ling change

His ‘Abenomics’ — policies centring mainly on reducing inflation to two per cent, correcting yen appreciation and expansion of public investment — Japan’s economy has grown by four per cent and the stock market by more than 40 per cent. His first two major economic measures — cash injections by the Bank of Japan and a major boost in public spending — are beginning to yield positive results. And it seems like Abe will have the power to continue his reform programme now. The coalition of the prime minister’s party Liberal Democratic Party will triumph with a clear majority in the elections of the upper house, according to exit polls, making it gain control of both chambers of the parliament. This means that the conservative Abe will be able to push his ambitious economic agenda and political programme of possibly revamping Japan’s post-war policy of liberal pacifism.

Japan has long suffered from a fractured parliament, with the opposition often blocking the passage of legislation and coercing frustrated prime ministers to resign. In the past six years, the country has had six prime ministers. But now that Abe’s ruling coalition has established a strong hold over the parliament, the prime minister will be able to continue with his policies of reviving the world’s third largest economy.

For Japan’s neighbours — China and South Korea — the consolidation of Abe’s power might spell trouble. The outspoken prime minister has often talked about revising the country’s pacifist constitution and has also taken a hardline stance vis-à-vis the islands dispute with its neighbours. But it’s his performance in the economic domain that will determine Abe’s fate in the long run.

And the task of reviving the Japanese economy — often described as Asia’s sleeping giant — is a formidable one. Abe needs to make tough decision to restructure the economy, including increasing taxes and deregulation. The challenge for him grand, especially now that he has a clear mandate to make tough and controversial decisions.