What’s at Stake in Japan’s Election

Japanese Prime Minister Shinzo Abe surprised the country and dissolved the lower house of parliament on November 21, 2014, calling a snap general election for December 14. In a new Q&A, James Schoff explains Abe’s move and analyzes the issues at stake. Schoff says a strong result for Abe’s party could boost the prime minister’s political capital as he pushes for key reforms, and it might spark realignment among the opposition.

WHY IS THE ELECTION BEING HELD NOW?

Abe says the vote, two years earlier than required, is necessary due to his recent postponement of a scheduled consumption tax hike—a decision that he says marks a watershed for his economic policy and requires input and approval from the public. More broadly, the prime minister is calling this a referendum on his so-called Abenomics approach of monetary easing, fiscal stimulus, and reform-oriented growth strategies.

Even as he argues that his economic policies are beginning to work, Abe admits that leftover negative effects from a first tax rise in April are delaying recovery. He wants more time to stimulate growth before raising taxes in 2017 as a means to reduce government debt and provide social security to Japan’s aging population.

Abe’s push for a new term can also be seen as an opportunistic political gambit that goes beyond economic policy. Relatively unpopular policies put forward by his Liberal Democratic Party (LDP) on restarting nuclear power plants and expanding Japanese defense cooperation with the United States will gain a higher profile next year, and a currently weak and disorganized political opposition in Japan could potentially strengthen as time goes on. Despite the inherent risks in any election, Abe determined that now is the best time to secure an extra two years for his party’s leadership, and the delayed consumption tax hike was a convenient excuse to press his advantage before the political environment deteriorated.

WHAT ARE THE MOST IMPORTANT POLICY ISSUES AT STAKE?

The vote could have important implications for Abe’s economic reforms and for his plan to broaden the mission of Japan’s Self-Defense Forces, among other pressing policy issues.

Japan’s economy officially slipped into recession in the third quarter of 2014 amid stalling private consumption and business investment, flat exports, and uneven wage growth, which were undercut by the previous tax hike and a rapidly weakening yen. The value of the yen to the dollar has tumbled more than 40 percent since Abe took office in late 2012.

A strong showing by the LDP will give Abe the political clout to push the more controversial of his economic policies, including trimming the corporate tax rate to 20 percent, facilitating corporate investment in farms to boost competitiveness and consolidation (and perhaps weaken the farm lobby), and enacting labor market reform, electricity market deregulation, and other measures. Even with victory, he might not succeed or even pursue all these reforms with sufficient determination, but a weak election performance all but guarantees inaction.

LDP success could also mean that pending legislation to expand the country’s military capabilities could become more ambitious, allowing Japan’s Self-Defense Forces to engage in a wider range of cooperative missions with the United States. Conversely, if the LDP ends up more reliant on its pacifist-minded coalition partner—the New Komeito party—then expect only modest security adjustments.

In addition, the LDP’s election performance could strengthen Abe’s political hand as the government pushes to restart nuclear reactors around the country, forge a deal with the United States as part of the Trans-Pacific Partnership trade agreement, and move forward with a national referendum on the constitution.