Snap elections pit Japan Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) against Tokyo governor Yuriko Koike's insurgent Party of Hope on October 22.
With snap election pitting Japan's Prime Minister Shinzo Abe’s Liberal Democratic Party (LDP) against a new and insurgent political force on October 22, Japan’s business leaders show little appetite for unpredictability.
For Abe, the timing is ideal. A weakened opposition and a boost in approval ratings have created an ideal opportunity for the leader to strengthen his mandate after a summer mired in political scandals.
But when Abe dissolved parliament in late September, the opposition Democratic Party of Japan (DPJ) dramatically dissolved itself to make way for the Party of Hope (Kibo no To) – the new party launched by Tokyo governor Yuriko Koike. She made waves last year when was she became Tokyo’s first female governor. Koike is a populist conservative reformer who has managed to position her party as the new opposition by attracting former DPJ members as well as defectors from Abe's LDP.
Abenomics versus Yurinomics
The response from the corporate world in this staunchly conservative country has so far been in favour of the status quo though. In a press conference held last week (October 10), Sadayuki Sakakibara, chairman of the Japan most powerful business lobby, the Japan Business Federation (Keidanren), voiced his organization’s approval of the previous five years of Abe's administration, which has been characterized by a program of fiscal stimulus and economic reform known as “Abenomics”.
He said: “By its very nature, political stability is a prerequisite for economic growth, and it is the hope of the business community that the ruling parties [LDP and its coalition partner, Komeito] will secure a stable majority of seats in the election and that such political stability will continue.”
From an economic standpoint, Koike has been a vocal critic of the Prime Minister’s Abenomics agenda, criticizing its over-reliance on monetary and fiscal stimulus. Her alternative vision, dubbed "Yurinomics", focuses on more structural measures, deregulation, a proposal for a universal basic income for low-income households, and a move to freeze an unpopular plan to raise the consumption tax from 8% to 10% by 2019.
Stability wins for business
Nevertheless, Abe’s two-thirds majority with junior coalition party, Komeito, appears safe. Polls results published by Nikkei have shown that the new party is struggling to gain traction in key seats. Koike herself, meanwhile, has decided to not run for leadership in these election as it would mean her standing down as Tokyo governor. For many corporations, this would likely be good news.
“Stability and continuity are always welcomed by the business community,” says Dr Ulrich Volz, a senior lecturer in economics and member of the Japan Research Center at the University of London. “Yurinomics is still fairly light in detail, so it is not clear whether most businesses would do much better with this alternative agenda. Large, cash-rich companies, which Koike wants to tax more, will certainly be happy if Abe stays on.”
While financial markets have shown little sign of concern about any political shift in Japan, the Party of Hope’s propositions are still likely to have an impact on LDP policies, adds Volz.
“While the limits to what monetary and fiscal policies can contribute to Japan’s economic revival have become already clear, the fact that Koike has been calling for more structural reforms, more business-friendly policies, and for policies that will benefit ‘ordinary’ people may well lead Abe to also shift in this direction,” he says.
The election has some interesting parallels with the UK general election held in June. Like UK Prime Minister Theresa May, Abe is seeking to take advantage of a weakened opposition and to strengthen his mandate by pledging stability. For May, the gamble backfired, leaving her with a minority government. For Abe, a victory is far more certain, but whether he gets a stronger mandate remains to be seen.
"There is still lots in the Abenomics reform agenda that Abe could focus on,” says Volz. “And he needs to deliver otherwise he risks of being seriously challenged at the next election.”