July 21, 2009 / 12:25 AM / 10 years ago

SNAP ANALYSIS:Japan election could bring historic change

TOKYO (Reuters) - Japanese cabinet ministers on Tuesday signed off on unpopular Prime Minister Taro Aso’s plan to call an election, expected on August 30, as surveys show the opposition likely to defeat his long-ruling Liberal Democrats.

The following are some implications of the general election for parliament’s powerful lower house.

* An opposition Democratic Party victory in the election would end half a century of nearly unbroken rule by the business-friendly Liberal Democratic Party (LDP) and raise the chance of resolving political deadlock caused by a divided parliament as Japan tries to recover from its worst recession since World War Two.

* Opinion polls show the Democrats clearly in the lead, although some analysts say that lukewarm voter support for the opposition and LDP attacks on the Democrats as soft on security, irresponsible on spending and tainted by funding scandals could end up reducing the Democrats’ margin of victory.

* The Democrats have pledged to pay more heed to the rights of individual consumers and workers than those of corporations, and to reduce bureaucratic control over policy-making as a way to reduce waste of taxpayers’ money and refocus spending.

* Investors would probably welcome an end to the stalemate that has stymied policy as Japan struggles with recession, but analysts also say the Democrats’ large spending plans could inflate public debt and push up government bond yields.

* A Democratic-led government would not likely signal an immediate drastic shift in macro-economic policies since, like the LDP, the party stresses the need to revive the recession-hit economy rather than quickly repair tattered state finances.

* The Democrats are likely to opt to form a coalition government with two smaller allies, one left-leaning and one conservative, even if they win a majority on their own in the lower house, because they need that co-operation in the upper chamber. That could hamper smooth policy formation.

* The Democratic Party has pledged to adopt diplomatic and security policies less “subservient” to close ally the United States, so some analysts fear the U.S.-Japan alliance may suffer. But the party appears to be toning down policies likely to worry Washington.

* The August 30 vote will be Japan’s first general election since 2005, when the charismatic Junichiro Koizumi led the LDP to a huge victory. Japan has had three more prime ministers since then, with Aso’s two predecessors both resigning after about a year in office in the face of deadlock and falling popularity.

Editing by Alex Richardson

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