Japan is at a crossroads. The next Prime Minister, Shinzo Abe, must consider serious reforms in order to tackle Japan’s enormous challenges.

By Felix Steinle and Kira O'Sullivan

Background

With an overwhelming majority of  325 out of 480 seats, the Liberal Democratic Party (LDP) – New Komeito Party alliance returns to power after three years in opposition. It is now up to the LDP leader Shinzo Abe to determine the country’s political future. As the most senior member of the LDP party, in vowing to continue visits to the controversial Yasukuni Shinto Shrine, Abe has portrayed himself as dedicated to the interests of a conservative, nationalistic Japan.

Prime Ministers of Japan tend to have short terms in offices. Apart from Junichiro Koizumi, who served from 2001 to 2005, none of the most recent Prime Ministers have remained in office for longer than fifteen months. Current Prime Minister Yoshihito Noda, dissolved the lower house of the Diet, Japan’s parliament, on 16 November 2012 after only eight months in office. Tellingly, Abe is now the country’s seventh Prime Minister within six years.

Since 1955, the LDP party presidential elections have tended to determine the selection of Japan’s future Prime Minister.  The center- right party has been the dominant power  in Japan’s two-party system throughout modern history. It maintains an extensive network of mutually beneficial relationships with bureaucratic and private organizations.  In 2009, in a historic election, the Democratic Party of Japan (DPJ) took the majority in the House of Representatives. Before then, the only other opposition party that held power did so in 1993  for 11 months.

This time Prime Minister Yoshihito Noda seemed certain to face a major loss, as he simultaneously prepared for the elections while proposing a consumption tax bill, and hiked  consumption tax from 5% to 10% by 2015. On 10 August 2012, the bill successfully passed both chambers of the parliament – with dramatic implications. As a reaction to Noda’s tax plans, former DPJ chairman Ichiro Ozawa and 49 other high ranking members left the party. Consequently, the Prime Minister was forced to cooperate with two opposition parties, who demanded new elections as a precondition for approval.

"I bear the biggest responsibility for the severe defeat," Noda said. After Sunday’s elections, in comparison to 230 DPJ seats before the election, its share has now shrinked to only 57 seats. Moreover, seven former Cabinet ministers have lost their seats.

Why are the Japanese General Elections relevant?

After two decades of economic stagnation, the country's fiscal debt rose above 200% of annual GDP in2011; by far the highest public debt among G20 nations. The decline has led economists to predict that Japan has entered its fifth technical recession of the past 15 years. In the third quarter this year, the country’s GDP fell by 0.9%.  China’s continuously growing economic power has meant that Japan has lost much economic and political significance within the region and internationally. Prospects are uncertain. A decline in the country's much admired manufacturing sector further impairs the critical situation.  In addition to this bleak economic situation, Japan’s new leaders will have to tackle perpetual deflation.

Alarming government predictions have shown that if current trends continue, Japan’s population of around 127 million will be halved by the end of the century. Falling birth rates mean that Japan is facing a rapidly aging population. With the proportion of the economically active population shrinking, the country will have more people in need of social security. Today, the biggest share of Japan’s public debt is social security. In addition, medical insurance, pension benefits, welfare and employment programs all need funding.

To add to the economic problems, Japan is still recovering from the impacts of the disaster at Fukushima Daiichi nuclear power plant. However, the country relies on nuclear power to supply approximately one quarter of its electricity needs. Nuclear power was originally supposed to fulfill half of the country’s energy demands. Due to the fact that Japan experiences 20% of the world’s earthquakes and prompted by the Fukushima disaster, the government has announced a new energystrategy which intends to end the heavy reliance on nuclear power by 2030. Natural resources must be imported, which is inevitably expensive. To carry out serious change from nuclear to renewable energy sources, the government must seek innovative solutions, building relationships with countries which could help its cause.

Despite Japan’s economic downturn over the past two decades and the consequent relative decline in international and regional significance, it continues to engage in several territorial disputes, concerning China, Russia and South Korea. Decision makers in Tokyo seem to be trying to compensate economic and political shortcomings by applying Japan’s armed forces to build regional alliances.Tellingly, Japan provided its first military aid abroad since World War II at the beginning of this year.

The most prominent of Japan’s international disputes is the case of the Senkaku-Diaoyou islands.  Both China and Japan continue to patrol the disputed area with naval vessels and recent Anti-Japan protests resulted in grave destruction and denunciation of Japanese products and businesses.

Despite enduring challenges, Japan still constitutes the third largest economy in the world. Given ongoing negotiations such as the EU-Japan partnership and the proposed Trans-Pacific-Partnership (TPP), the country is clearly still able to leverage its economic might on both international and regional levels.

East-Asia is changing rapidly and Japan is falling on hard times. To further guarantee a secure environment, the region relies on a modest and stable government in Tokyo. It remains an open question whether a hawkish government centered around Abe will provide the basis for a peaceful and prosperous East – Asia.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.