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POLITICAL ECONOMY
Markets cheer Japan conservatives' return to power
by Staff Writers
Tokyo (AFP) Dec 17, 2012


Japan vote 'harsh verdict' on ousted ruling party: media
Tokyo (AFP) Dec 17, 2012 - The landslide election victory for Japan's conservative opposition marked a "harsh verdict" by disgruntled voters on the ousted Democratic Party of Japan, media said Monday.

The Liberal Democratic Party (LDP) win in Sunday's polls gave its leader and one-time premier Shinzo Abe a chance to push his hawkish security agenda and reflate the world's third-largest economy, but it was "a landslide victory without zeal", the top-selling Yomiuri Shimbun said in an editorial.

"Voters handed down a harsh verdict on the government of the Democratic Party of Japan (DPJ)," the mass-circulation daily said.

Voters dumped Prime Minister Yoshihiko Noda three years after his DPJ promised a change from more than half a century of almost unbroken rule by the conservative LDP.

However, analysts say the victory came by default, with voters disenchanted by the DPJ after three years of flip-flops, policy missteps and diplomatic drift, but having little faith in any of the alternatives.

The influential Mainichi Shimbun said Sunday's result "shows a public sentiment that wants steady policy management".

"Shinzo Abe, who will become the next prime minister, should humbly accept 'the landslide without fanfare'," it said.

Japan's electorate punished the DPJ for its poor handling of a controversial US military base relocation in Okinawa that hurt ties with Washington.

It was also criticised for its slow and sometimes confused post-disaster management after last year's quake-tsunami disaster and subsequent nuclear crisis at Fukushima, the worst atomic accident in a generation.

The leading Nikkei business daily warned against the LDP becoming too confident in its lacklustre win.

If the LDP "fails to make change, voters will give a strict verdict again next time", it said.

Together with New Komeito, its junior coalition partner, the LDP is expected to have a two-thirds majority of the powerful 480-seat lower house, enough to override the upper house in which no party has overall control.

But with poor voter turnout and complaints that the LDP was the least-worst option, even Abe acknowledged the result was no ringing endorsement.

"This doesn't mean confidence in the LDP has been fully restored," he said Sunday.

"I think this result means a 'no' to the political confusion of the DPJ. People will be carefully watching to see if the LDP can live up to expectations."

The 58-year-old Abe, whose first stint as premier in 2006-7 ended ignominiously, has vowed to rectify the listless economy after years of deflation, made worse by a soaring currency that has squeezed exporters.

He also offered to boost spending on infrastructure at a time when much of the tsunami-wrecked northeast remains a shell of its former self.

On security, Abe pledged to bolster Japan's defences and stand up to China in a dispute over the sovereignty of a small chain of islands in the East China Sea.

Investors on Monday cheered after Japan's conservatives swept back to power in national elections, with promises of a fix for the economy and tougher diplomacy in a territorial spat with China.

Prime minister-in-waiting Shinzo Abe, the hawkish head of the Liberal Democratic Party, wasted no time in asserting sovereignty over disputed islands in the East China Sea, declaring them "Japan's inherent territory".

Abe, a one-time premier, also vowed to put Japan's moribund economy back on track after years of deflation, made worse by a soaring currency that has squeezed exporters.

Topping his agenda was a promise to pressure the Bank of Japan into more aggressive easing policies aimed at kickstarting growth as the world's third-largest economy slips into recession.

All eyes will be on the bank's policy meeting this week to see whether the nation's central bankers move in line with Abe's wishes.

Investors are increasingly betting on some action from the central bank, with the yen tumbling against the dollar and euro on Monday while Tokyo's Nikkei 225 stock index surged 1.62 percent at the open.

On Sunday, voters dumped Prime Minister Yoshihiko Noda three years after his Democratic Party of Japan (DPJ) promised a change from more than half a century of almost unbroken LDP rule. The result cost Noda his party leadership.

The rout was completed by news that the LDP and its junior coalition party New Komeito had secured a super majority in the lower house that will allow them to overrule the upper chamber.

"Control of two-thirds of lower house seats would alleviate concerns about divided control of the Diet's two chambers," brokerage giant Nomura said in a note.

"It is also likely to fuel expectations, particularly among foreign investors, of more expeditious policymaking."

Analysts, however, say the LDP's victory came by default, with voters disenchanted by the DPJ after three years of flip-flops, policy missteps and diplomatic drift, but having little faith in any of the alternatives.

With turnout at a record low and voters complaining of no real choice, even Abe acknowledged the result was not a ringing endorsement.

"This doesn't mean confidence in the LDP has been fully restored," Abe said after the vote.

"I think this result means a 'no' to the political confusion of the DPJ. People will be strictly watching if the LDP will be able to live up to expectations."

Public unease about a worsening security environment -- North Korea's mastering of rocket science last week, days before Beijing sent a plane into Japan's airspace -- bolstered Abe's campaign.

And he showed no signs of easing on his plan to press Beijing over their simmering territorial dispute.

"China is challenging the fact that (the islands) are Japan's inherent territory," he said. "Our objective is to stop the challenge. We don't intend to worsen relations between Japan and China."

Abe's offer to boost spending on infrastructure was standard fare from the LDP playbook, but chimed with voters in the northeast, where the devastation of the March 2011 tsunami is still evident.

His win stoked speculation that whoever is appointed to replace BoJ governor Masaaki Shirakawa next year will favour a more aggressive easing stance.

"Foreign investors are likely to remain bullish, betting that Mr. Abe will fulfil his promises to turn on the fiscal taps," Kenichi Kubo, senior fund manager at Tokio Marine Asset Management, told Dow Jones Newswires.

He is likely to "pressure the Bank of Japan into much more aggressive asset purchases to pull Japan out of recession and prolonged deflation".

However, Credit Agricole said in a note that "it is not obvious that coalition parties will be as welcoming" to Abe's aggressive policies.

Stephen Church, research partner at Japaninvest, added that Abe's previous tenure in Japan's top political job was scarred by unfulfilled promises.

"Expectations have built up that (he) will deliver on his policy pledges," Church said.

"(But) he has a record of not delivering."

.


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