Japanese prime minister Shinzo Abe appears to have won a majority in the country's upper house elections, which commentators have called a vindication of his economic politics andthe potential start of “Super-Abenomics”.
Abe’s Liberal Democratic Party will take 65 of the 121 upper house seats, which gives his coalition government a comfortable majority in both houses of the Diet.
John Vail, chief global strategist at Nikko Asset Management, says the victory will allow Abe to implement an even more aggressive strategy.
He says “reform will now be even stronger than promised and undertaken with alacrity, in what we call Super-Abenomics”.
Vail predicts Abe will make major changes such as permitting a gambling industry, approving large-scale resorts and accelerating the restart of nuclear power plants.
“Although these are controversial issues, they will have a positive effect on the economy and, significantly, they mark a huge change in Japan’s willingness to change for growth,” he says.
“What is being done now in Japan hasn’t been attempted for decades; however, both within Japan and internationally, there is a growing belief that this could work.”
Shogo Maeda, head of Japanese equities at Schroders, says the election win should allow Abe to focus on his growth strategies and pro-business policies.
Maeda says one important issue is whether the government will implement its planned hike in consumption tax from 5% to 8% in April 2014.
“Another test of Mr Abe’s determination to drive through reform will come through negotiations to join the 11-nation Trans-Pacific Partnership (TPP), a proposed free trade zone,” he adds.
“With regards to his growth strategy at home, we believe he will prioritise speed and practicality, focusing on measures that can be realised quickly.”
However, Maeda warns that more significant, structural changes to the economy may have to wait. These may not deliver substantial gains considering the intense political bargaining required, he says.
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