Japan’s LDP surges back to power, eyes two-thirds majority with ally

Japan’s conservative Liberal Democratic Party (LDP) surged back to power in an election on Sunday just three years after a devastating defeat, giving ex-Prime Minister Shinzo Abe a chance to push his hawkish security agenda and radical economic recipe.

A TV Asahi projection based on counted votes gave the LDP at least 291 seats in parliament’s 480-member lower house, and together with its small ally, the New Komeito party, a two-thirds majority needed to override, on most matters, the upper house, where no party has majority,according to Reuters.

That would help break a policy deadlock that has plagued the world’s third biggest economy since 2007.

“We have promised to pull Japan out of deflation and correct a strong yen,” Abe said on live television. “We need to do this. The same goes for national security and diplomacy.”

Parliament is expected to vote Abe in as prime minister on December 26.

Analysts said that while markets had already pushed the yen lower and share prices higher in anticipation of an LDP victory, stocks could rise and the yen weaken further in response to “super majority.”

While LDP and New Komeito officials confirmed they would form a coalition, LDP Secretary-General Shigeru Ishiba did not rule out cooperation with the Japan Restoration Party, a new right-leaning party that was set to pick up at least 52 seats.

“I think there is room to do this in the area of national defense,” he said. The New Komeito is more moderate than the LDP on security issues.

Projections showed Prime Minister Yoshihiko Noda’s Democratic Party of Japan winning at least 56 seats, less than a fifth of its tally in 2009. Noda said he was stepping down as party leader after the defeat, in which several party heavyweights lost their seats.

The Democrats swept to power in 2009 promising to pay more heed to consumers and break up the “iron triangle” of the powerful bureaucracy, business and politicians formed during more than half a century of almost unbroken LDP rule.

Many voters had said the DPJ failed to meet election pledges as it struggled to govern and cope with last year’s huge earthquake, tsunami and nuclear disaster, and pushed through an unpopular sales tax increase with LDP help.

Voter distaste for both major parties has spawned a clutch of new parties including the Japan Restoration Party, founded by popular Osaka Mayor Toru Hashimoto.

The LDP, which promoted nuclear energy during its decades-long reign, is expected to be friendly to power utilities, although public safety concerns remain a barrier to business-as-usual for the industry.

Abe has called for “unlimited” monetary easing and big spending on public works to rescue the economy from its fourth recession since 2000. Such policies, a centerpiece of the LDP’s platform for decades, have been criticized by many as wasteful pork-barrel politics.

Kyodo news agency said the new government could draft an extra budget for 2012/13 worth up to 10 trillion yen ($120 billion) and issue debt to pay for it.

Many economists say that prescription for “Abenomics” could create temporary growth and allow the government to go ahead with a planned initial sales tax rise in 2014 to help curb a public debt now more than twice the size of Japan’s economy.

R.S