LDP's Japanese landslide may mean expansionary economic policy, less antagonism towards nuclear power and hawkishness towards China

By Tim Montgomerie
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The Liberal Democrats who dominated Japanese politics for nearly all of the country's post-war period were booted from power three years ago as punishment for the country's decade of stagnation and for cronyism between an indebted political establishment and special interests. The LDP was re-elected, however, with a super-majority in weekend elections - winning in such a large landslide that they may be able to govern without worrying about the upper house's power of veto.

The LDP leader Shinzo Abe - who will become PM for the second time - was keen to downplay the implications of the victory, however. “This result doesn’t mean that public support for the LDP has 100 per cent recovered,” he was quoted in the FT (£), “It’s a rejection of the last three years of political confusion. Now it’s up to the LDP to live up to people’s expectations.” Mr Abe's first challenge will be to bring stability to his country. In recent years Japan has resembled old-time Italy with almost annual changes in the person holding the office of prime minister.

Markets are expecting a much more expansionary economic policy from the new government. Mr Abe will order a looser monetary policy from the Bank of Japan (having called for ‘unlimited’ easing) and the Wall Street Journal reports that "Mr. Abe will instruct his government, expected to take office around Dec. 26, to compile a ¥10 trillion ($120 billion) extra budget... a figure near the upper end of market expectations." He has previously suggested that the outgoing government's doubling of consumption taxes would be implemented but might need to be delayed.

The LDP may slowly edge Japan back towards a pro-nuclear power position but post-Fukushima it is treading carefully.

Much attention has also focused on the implications of the LDP's return for Japan's relations with its hostile near neighbours. Mr Abe has called for an upwards recalibration of defence spending so that Japan can send a message to China following its military build-up. He will also re-assert Japan's post-war alliance with the United States. He has fiercely re-asserted Japan's sovereignty over islands that are disputed by Beijing. He also wants Japan to be less apologetic about its role in World War II. The Guardian fears a new nationalist flavour from Tokyo:

"Abe has often said he went into politics to help Japan "escape the postwar regime" and throw off the shackles of wartime guilt. In its place he has talked of creating a "beautiful Japan" defended by a strong military and guided by a new sense of national pride. "I have not changed my view from five years ago when I was prime minister that the biggest issue for Japan is truly escaping the postwar regime," he said in a recent magazine article."

Japan set to vote for more interventionist government

6pm: As expected the LDP has been crushed in Japan's election. The Democratic Party of Japan has won more than 300 of the 480 seats in the Lower House elections.  The LDP's Leader, Taro Aso, has already resigned.

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Japan's Liberal Democratic Party has ruled the nation for all but 11 months of the years since 1955 but that domination is set to end today. The opposition Democratic Party is expected to win a landslide. The DPJ (Democratic Party of Japan) are so untested that noone really knows what kind of government they will be. The DPJ manifesto suggests, however, that there will be an increase in workers' rights, more support for farmers, toll-free motorways, a higher minimum wage and a less supportive attitude to American foreign policy. The DPJ has attacked American "market fundamentalism" and vowed to build a Japanese economy built on the concept of "fraternity".  See Wall Street Journal and Economist reports.