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2012-12-16

Voters continue swerving from left to right, right to left

It is almost a truism in this period of negative mood: voters will elect the opposite end of the political spectrum in the next election. The only potential exception to the rule is, if the winning party pursues a radical agenda, they can secure reelection.

Japan is now about to test this exception: LDP wins absolute majority
The LDP has won 277 seats, more than the absolute majority of 266, in the 480-member House of Representatives. Absolute majority allows the party to allocate chairpersons to all 17 standing committees of the chamber and also secure a majority in all of them.

The LDP's coalition partner, New Komeito, has won 28 seats.

Combined, they have 305 seats. Attention is now focused on whether the 2 parties will win a total of 320, the two-thirds majority that allow bills to be enacted in a re-vote if they are rejected by the upper house. The LDP and New Komeito are short of a majority in the upper house.

The Democrats have won only 48 seats and are likely to lose more than two-thirds of the party's pre-election strength of 230 seats.

Newly-formed Japan Restoration Party led by former Tokyo Governor Shintaro Ishihara has won 43 seats.

Your Party led by former administrative reform minister Yoshimi Watanabe has won 13 seats.
This represents a major win for right-wing parties. The four parties mentioned all have right-wing economic platforms. For political reasons, those not in power may vote against the majority, but at least in theory, there's a 75-80% coalition in favor of tax cutting and deregulation.

LDP leader Shinzo Abe has a radical agenda that goes well beyond tax cutting though.

Everyone Is Talking About A Japanese Game-Change That Could Finally Break The Back of The Yen
BOJ's Shirakawa Calls Abe's 3% Inflation Target Unrealistic
The right-wing politician, who has recently returned to head the main opposition Liberal Democratic Party after giving up his premiership five years ago due to poor heath, is also calling for "unlimited" monetary easing by the BOJ and a reduction in the policy rate to zero or below zero from the current range of zero to 0.1%.

Shirakawa brushed off Abe's call for underwriting construction bonds to be issued for financing public works spending, saying that the BOJ has already been buying large amounts of JGBs, and even that could be interpreted as financing fiscal needs.
One big difference between the LDP and the Restoration Party is that the former favors a Keynesian approach, whereas the latter prefers a supply-side approach. However, the key policy shift is the 3% inflation target. If successful, it would change the global economy, let alone Japan.

Abe will need to hit his target if he wants to avoid his earlier fate and the fate of every Japanese PM since the mid-2000s. Here's what the LDP is up against:

Source: Prime-Ministerial Unpopularity Contest at the Edge of the Japanese Abyss

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