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Japan: LPD wins landslide victory

December 16, 2012

The Liberal Democratic Party (LDP) led by former Prime Minister Shinzo Abe won the general elections held on 16 December by a landslide, securing 294 seats out of the 480 in the House of Representatives. In addition, the New Komeito party - an ally of the LDP - garnered an additional 31 seats, providing Abe with a supermajority of two thirds in the Lower House, which is required to overrule the decisions made in the Upper House. In contrast, the Democratic Party of Japan (DPJ), led by incumbent Prime Minister Yoshihiko Noda, suffered an electoral debacle, winning only 57 seats.

Abe has called for "unlimited monetary easing" by the Bank of Japan (BoJ) as well as for expanding fiscal stimulus in order to pull the country out of recession. In addition, Japan's next Prime Minister also vowed to double the Central Bank's current inflation target to 2%, in an attempt to beat deflation. Although the BoJ is reluctant to adopt a more dovish stance, Abe may nonetheless succeed in his efforts, as he will replace three top BoJ board officials between March and April, including current Governor Masaaki Shirakawa.

Another key issue during Abe's mandate will be the relation between Japan and its neighbours, in particular China, as the new prime minister has vowed to take a hard line on the Asian giant. In this regard, Abe has already stated that there is no room for negotiation over the sovereignty of the Senkaku/Diaoyu islands, which has been a constant source of tension between the two countries in recent months.


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