Japan’s ruling Liberal Democratic Party (LDP) and ally Komeito retained their two-thirds majority in the Lower House of Parliament, with the LDP securing at least 284 seats. The Party of Hope, led by Tokyo Governor Yuriko Koike, lost seats while the Constitutional Democratic Party made significant strides to become the second largest bloc.
“This result reflects the fact that many people are basically satisfied with everyday life in Japan,” said Takashi Maruyama, Chief Investment Officer, Japan, at asset manager Fidelity International. “Most Japanese people appreciate the progress of Abenomics,” he adds, noting that Japan’s GDP has grown for six quarters in a row.”
With his victory in the October 22 polls, Prime Minister Shinzo Abe is now virtually guaranteed re-election to the LDP presidency in September 2018, and thus could remain in power until 2021. He will become the country’s longest serving prime minister if he stays through until 2019.
The election results mean that the economic policy known as Abenomics will likely remain in place, along with the highly accommodative framework of the Japanese central bank. Abe has expressed full confidence in Gov. Haruhiko Kuroda, whose term ends in April 2018. The accommodative stance will likely continue regardless of whether Kuroda is reappointed or not.
The LDP also plans to increase Japan’s sales tax to 10% in October 2019 and use the proceeds for education and child care. Abe also intends to create an investment program designed to enhance productivity.
One controversial issue is Abe’s desire to amend Japan’s pacifist constitution to specifically recognize the Self-Defense Forces, Japan’s de facto military. Any change to the constitution must be approved by two-thirds of the lower and upper houses of Parliament, and by a simple majority in a national referendum.
Provocation by North Korea is believed to have helped propel Abe to election victory. Constitutional reform may get a boost if Pyongyang’s threats continue, but Abe may focus first on strengthening the economy while moving cautiously on militarization.