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Abe Announces Japan Snap Election, Will Face New Challenger

Courtesy of ZeroHedge. View original post here.

As if the just concluded German elections, and the upcoming referendums in Catalonia and Iraqi Kurdistan were not enough, here comes Japan.

Shortly following Sunday night reports that Japanese Prime Minister Shinzo Abe plans to launch a new economic stimulus package of around 2 trillion yen ($17.8 billion) by the end of this year, which sent the Yen sliding to session lows and the USDJPY rising as high as 112.50 before fading the entire move, on Monday the Japanese premier confirmed recent rumors when he said he would dissolve parliament’s lower house on Thursday for a snap election, as he seeks a fresh mandate to overcome “a national crisis”. Abe, in power for five years with the success of his famous Abenomics always just beyond reach, said he needed a mandate to shift some revenues from a planned future tax hike to social spending such as education, besides seeking support for a tough stance toward North Korea’s repeated missile and nuclear tests.

“I will dissolve the lower house on Sept. 28,” Abe told a nationally televised news conference on Monday according to Reuters. Earlier, the head of Abe’s junior coalition partner, Natsuo Yamaguchi, said he understood the election would be held on Oct. 22.

The decision is aimed to take advantage of Abe’s recently surge in favorable ratings following a crash in support for Abe as early as two months ago as a result of ongoing corruption scandals in his party, as well as ongoing opposition disarray. The main opposition Democratic Party is struggling with single-digit ratings and much depends on whether it can cooperate with liberal opposition groups.

Abe’s image as a strong leader has bolstered his ratings amid rising tension over North Korea’s nuclear arms and missile programs and overshadowed opposition criticism of the premier for suspected cronyism scandals that had eroded his support.

As the FT notes, "the general election will decide whether Japan continues with its stimulative economic policies and whether Mr Abe has the political strength to drive through a revision to Japan’s war-renouncing constitution."

Abe, whose ratings have risen to around 50% from around 30% in July, is gambling his ruling bloc can keep its lower house majority even if it loses the two-thirds “super majority” needed to achieve his long-held goal of revising the post-war pacifist constitution to clarify the military’s role. According to Reuters, A weekend survey by the Nikkei business daily survey showed 44% of voters planned to vote for Abe’s Liberal Democratic Party (LDP) versus just 8% for the main opposition Democratic Party and another 8% for a new party launched by popular Tokyo Governor Yuriko Koike.

The Nikkei poll was far more positive for Abe’s prospects than a Kyodo news agency survey that showed his LDP garnering only 27.7% support, with 42.2% undecided.

Still, while Abe starts from a strong position, the early election has prompted a drastic realignment among Japan’s opposition, with Tokyo governor Yuriko Koike declaring, just hours before Abe's election announcement, that she would lead a new conservative, reform-minded “Party of Hope”, to offer voters an alternative to the LDP.

“Our ideal is to proceed free of special interests,” Koike, a former LDP member, told a news conference.  “I am raising my flag for real,” declared Ms Koike at a press conference timed to upstage the prime minister. She said the party would run on her signature anti-establishment platform of reform and opposition to vested interests. “The thing Japan lacks is hope,” she said quoted by the FT.

Previously, Ms Koike had sponsored the launch of the new party but stayed behind the scenes. Now she has declared herself as its leader, indicating she will take a prominent role in the election campaign.

Confirming the ongoing power rotation, Mineyuki Fukuda, a deputy minister in the cabinet office, said he was quitting the ruling Liberal Democratic party to stand for the new Party of Hope. He joins a series of established politicians, most of them defectors from the opposition Democratic party, who will run under Ms Koike’s banner.

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Abe’s election platform will see him promise to go ahead with a planned rise in the national sales tax to 10% from 8% in 2019 but increase the proportion of revenue spent on child care and education, delaying a target of putting the budget in the black in the fiscal year ending March 2021. As noted above, also on Monday, Abe asked his cabinet to compile a 2-trillion-yen ($17.8-billion) economic package by year-end to focus on child care, education and encouraging corporate investment, while maintaining fiscal discipline.  The Yomiuri newspaper said earlier the funding would cover the three years from April 2018 until sales tax revenue kicks in.

Abe also wants a minor revision to the constitution that would explicitly recognise the legality of Japan’s Self-Defence Forces. Ms Koike backs constitutional reform, increasing the odds that supporters of a change will secure the two-thirds parliamentary majority needed to pass a revision, and will subsequently take it to a national referendum for approval.

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Meanwhile, critics of Abe's decision says the prime minister risks risked creating a political vacuum at a time of rising geopolitical tension over North Korea.  And, given the unexpected results seen in other major developed countries, political analysts are not ruling out a “nasty surprise” for the Japanese leader.

“Abe’s big gamble could yield a big surprise,” veteran independent political analysts Minoru Morita said.

For a vivid example of just that, see the outcome from Sunday's "nightmare victory" for Merkel, which virtually nobody had expected, yet which overnight set Germany's right wing AfD party as the country's third most powerful political entity.


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