Japan’s political system is designed to ensure stability, while limiting the power of any group that is not backed by broad, sustained popular approval. When politics are fragmented, and voters unable or unwilling to grant a clear mandate, …
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Mikio Kumada, Global Strategist at LGT Capital Management
hardly any prime minister lasts for much more than a year, making democracy look a like a liability. But when consensus is reached, this system can provide steady, determined, and legitimate leadership, proving its worth as a strategic political asset.
Ruling coalition wins landslide victory
Last Sunday, Japan’s ruling coalition under Prime Minister Shinzo Abe, won 74 of the 121 contested seats of the House of Councilors, or Upper House. The Liberal-Democratic Party (LDP) and the New Komeito (NKT), its traditional junior partner, now field 135 of the chamber’s 224 members – a comfortable majority of 60%. The general political mandate is even stronger than that, which will help ensure a stable, predictable government until late 2016, when the next election is due – an extraordinary development for Japan, where prime ministers only rarely stay in power for much more than a year.
Support for Abenomics remains very strong
Specifically, the government’s economic revitalization program, known as “Abenomics”, is more popular than the coalition itself. Exit polling of 197,000 voters by NHK television showed support for “Abenomics” stood at 72% – which is far greater than the share of the two ruling parties. Conversely, proposed revisions to the constitution, including the idea to expand the role of the military, attracted an approval rate of only 39% – despite the prime minister’s personal efforts to promote them. Besides, coalition partner Komeito is opposed to the changes, and the LDP would fail to obtain the necessary supermajority even if it sided with the two opposition parties that favor such reforms.
Comfortable majorities on all key economic issues in both houses
Sunday’s mandate is also clear if we look at the views now prevalent in both houses of parliament by issue (see page 2 in the PDF), rather than party. Importantly, nearly all elements of “Abenomics” enjoy comfortable majorities in both chambers. Aggressive monetary stimulus is supported by an overwhelming majority of nearly 90% – which contrasts with the far more controversial views on “quantitative easing” in both the US and Europe. The only issue facing heavy opposition in both chambers is the opening of Japan’s agriculture market as part of Japan’s eventual entry into the Trans-Pacific Partnership, or TPP (a planned free trade zone including the US, most Asian and some South American countries). However, there is a strong majority in favor of TPP entry.
Abenomics: Yes – Constitutional experiments: No
In short, seven months after taking power, Prime Minister Abe has received popular confirmation for his economic program – which includes tax increases and other potentially unpleasant changes in the not too distant future. At the same time, voters have also rejected revising any part of the constitution. This issue is important because it has the potential to further strain Japan’s relations with China and Korea, and derail the effort to end Japan’s economic stagnation, and reverse the positive momentum in markets. Skeptics have been suggesting from the onset that Abe cannot be fully trusted as an economic reformer, warning that he would use his strengthened position to pursue a more sinister, nationalist agenda that includes a stronger and less constrained military. The counterargument is that Japan’s civil society and political system would ensure the LDP would rather quickly be booted out of power again if it strays too far from the mandate it has actually received. After all, that is exactly what happened in 2006-2007, during Abe’s first, short-lived stint as prime minister. By summer 2009, the LDP had lost its strong majorities in both chambers, and remained out of power for an unprecedented three years. Surely, Japan’s democracy at times looked almost like the main cause of the country’s stagnation. But now, it has once again started to provide the country with a healthy sense of direction, as well as reasonable assurance that the newly-empowered government will actually remain focused on its mandate – instead of getting bogged down in controversial and probably unproductive ideological experiments.
Source: ETFWorld – LGT Capital Management
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