Japan Inc frets PM may lose economic focus after election -Reuters poll
* Most respondents want LDP to win but be reined in
* Firms want corporate tax cuts, deregulation
* Firms also want better relations with China, Korea
* But Abe seen likely to prioritise nationalist policies
By James Topham
TOKYO, July 19 (Reuters) - Japanese firms want Prime Minister Shinzo Abe's party to win Sunday's election, but they worry a big victory will allow him to prioritise nationalist policies at the expense of building on gains wrought by his aggressive stimulus measures, a Reuters poll showed.
The Reuters Corporate Survey underscored the caution that has kept Japan Inc from raising wages or aggressively increasing capital spending, even as "Abenomics" has sent cheers through the Tokyo stock market and begun boosting growth and profits.
Lower corporate taxes, effective structural reform and better relations with China and Korea top Japanese firms' wishlist, the survey of upper management at 400 companies conducted July 1-12 showed.
But it also showed that they expect taxes and deregulation to take a backseat to revising Japan's pacifist constitution - an issue dear to Abe's heart - if he cements his hold on government. That in turn would further test relations with Beijing and Seoul, already frosty over competing claims to several small islands.
"We want a stable government that puts priority on the economy, but if the LDP wins too big, there is a danger that too much focus will be on things other than the economy," wrote one respondent at a transportation company.
Abe is headed for a resounding win in the vote for the upper house of parliament, with the ruling Liberal Democratic Party and its coalition partner New Komeito likely to win more than 70 of the 121 seats up for grabs, according to polls taken by local media.
While some 40 percent of the 263 companies answering questions about preferred election choices were supportive of the LDP having a majority, most respondents did not want the ruling party unfettered.
Forty-six percent said they would like the LDP to hold a majority with their Buddhist-backed coalition partner. Another 10 percent said they wanted the LDP to have the most seats in the upper house but not a majority.
"We need the Komeito to rein in a hardening in the government's foreign policy stance towards Asia," a machinery company wrote.
Fresh in corporate minds is last year's territorial row between Japan and China, which led to violent protests and calls for boycotts of Japanese products in China. Brands like Toyota Motor Corp and Nissan Motor Co saw their sales plummet in the subsequent months.
"The so-called 'China Risk' or 'Korean Risk' is becoming a worry for (Japanese) management, said Shintaro Okuno, a partner at consultants Bain & Company Japan.
"And the combination with organic issues, particularly the ones China has - surging wages, pollution, political instability - are creating concerns for Japanese management about whether or not they should increase investment in or exposure to China," he added.
The poll conducted for Reuters by Nikkei Research also showed that their concerns about Japan's debt levels have increased.
Abe's hyper-easy monetary policies, while weakening the yen and boosting stocks, have also roiled bond markets in a country where sovereign debt amounts to more than double GDP.
Some 68 percent of respondents in the corporate poll saw a European-style debt crisis erupting within a decade, up from 57 percent in the survey six months ago.
And while expectations are high that Abe will tackle free trade issues, many respondents also expressed dissatisfaction with the pace of structural reform - another key platform for Abe but one that has failed to yield much in the way of specifics.
"The path to economic growth lies in deregulation. We especially don't want the government to bow to the political power of vested interests," wrote one electronics firm.
The Reuters Corporate Survey is conducted in tandem with the Reuters Tankan survey, which showed the mood amongst Japanese manufacturers slid in July for the first time in eight months on worries about an economic slowdown in China.
Companies polled are each capitalised at more than 1 billion yen. The firms, which are split evenly between manufacturers and non-manufacturers, are not required to answer every question, and provide responses on condition of anonymity. (Editing by Edwina Gibbs)
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