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Economic implications of Japan's election

Published on NewsOK Modified: December 16, 2012 at 8:23 am •  Published: December 16, 2012

TOKYO (AP) — Many in Japan are hoping that the landslide victory of the opposition Liberal Democrats and trouncing of the Democratic Party in Sunday's parliamentary election will help the country break out of a 20-year economic slump. Here is a summary of the possible economic implications of the coming change in leadership:

— ECONOMIC STIMULUS: Liberal Democratic Party chief Shinzo Abe, who is almost certain to replace Democrat Yoshihiko Noda as prime minister, favors raising spending on public works and setting a 3 percent economic growth target. He has lobbied for stronger action by the central bank to create more demand and break Japan out of its deflationary trap. Critics say that boosting deficit spending too aggressively, though, could undercut confidence in the government bond market, destabilizing Japan's finances.

— TRADE: The Liberal Democrats back Japan's involvement in the Trans-Pacific Partnership, a region-wide free trade initiative backed by the U.S., but demand protection from foreign competition for farmers and other traditional supporters. The party's nationalist policies could hurt exports and industries with heavy investments in China, but powerful business interests — and the Liberal Democrats' coalition partners in the Komeito — will likely push Abe to cool tensions with Beijing.

— REFORMS: The party says it will revamp Japan's economic strategy but offers few details on overhauling the bureaucracy and other institutions. It plans corporate tax cuts to help make Japan the "most business-friendly country in the world," but is conservative on such issues as labor market and social reforms offering more opportunities for women.

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