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Japan Parliament Re-elects Shinzo Abe for Third Term
Dec 27, 2014

Shinzo Abe won endorsement to serve another term as prime minister after winning a renewed mandate for his Abenomics strategies for reviving the world’s third-biggest economy. Shinzo Abe appointed a former military officer, Gen. Nakatani, as defence minister but to keep the other members of his previous cabinet.

Shinzo Abe won 328 votes out of the 470 cast by lawmakers in a special session of the lower house. Since the ruling Liberal Democrats hold 326 lower house seats, two other lawmakers also cast votes for Shinzo Abe. The victory by the ruling Liberal Democrats and their coalition partner the Komei Party is viewed as an endorsement by the public of Shinzo Abe’s strategies for reviving Japan’s stagnant economy, despite a record low turnout.

Two years after Shinzo Abe first took office, he faces strong expectations for more aggressively tackling politically tough reforms for boosting the economy. Shinzo Abe also served as prime minister in 2006-2007 before quitting due to health problems.

The economy fell into recession last year following a sales tax hike in April to 8 percent from 5 percent, prompting Shinzo Abe to put off until 2017 a tax hike planned for October 2015. Meanwhile, the central bank has stepped up its purchases of assets, pumping up to 80 trillion yen ($663 billion) a year into the economy to help drive prices higher and spur faster growth. A recent decision to shift more public pension money into stock investments is driving share prices higher.

Since Shinzo Abe must call the next election by December 2018, he could have another four years to deliver on pledges to open markets and streamline regulations that have hindered Japan’s competitiveness. So far, Japan’s powerful bureaucracy and its rural and commercial sectors have resisted major changes, foiling earlier reform efforts. But perhaps the biggest challenge is in getting private industry to significantly raise wages while they are still struggling to contain costs to compete with other big export economies.

The meagre increases in the past two years have not kept pace with inflation, hobbling a recovery in consumer demand needed to put growth on a sustainable path. Such structural problems, namely labour shortages and corporations shifting production overseas, have become more evident and offset the policy effects that Prime Minister Shinzo Abe has pursued since he took office in late 2012. Although the government has pledged to accelerate structural reforms, it will take some time to see the effects contribute to growth.

 


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