Japan Elections: After DPJ Landslide, can the Japanese Economy be Reformed?

By: CaraTan   Date: 13 August 2009

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Tokyo, Japan, 31 August 2009. Monday's landslide elections which saw the Democratic Party of Japan (DPJ) assume control after nearly 50 years of LDP rule beg one question: Will the new party be able to pull Japan out of its economic troubles?

Ultraman's help might be needed to reform the Japanese Economy
Credit: emrank

Ultraman and Mt. Fuji

While the victory was historic - possibly even as big as Obama being elected in the US - it was to many considered more of a vote of no-confidence against the party that has ruled the nation for most of the second half of the 21st century.

"Voters didn't vote for Hatoyama's party just because they think he can bring the economy back to the boom of the 80s," explained analyst Yamashita Masato.

"They voted for him because of their extreme dissatisfaction with Aso and the Liberal Democrats in general."

"This is a victory for the people," said Hatoyama, who will soon assume position of prime minister. "We want to build a new government that hears the voices of the nation."

The DPJ has made big promises to address many of the economic shortfalls the nation faces. With high unemployment, deflation, and an aging population, the fiscal conditions will only worsen.

Simply put, the country is receiving less tax income than ever.

Japan's deficit is almost 200 percent its GDP which only exacerbates the problem. So these promises really resonated with the voters.

The DPJ's promises include free secondary schools, stipends for unemployed workers who are actively seeking jobs, tax cuts, higher minimum wage, toll-free highways, and about $300 per month per child through junior high school.

Much of the economic agenda by the DPJ is to see the export-dependent economy rely more on domestic spending.

But such an agenda will only worsen the already-bad deficit, critics say. The DPJ's plan will cost about $200 billion if it is entirely implemented beginning in fiscal year 2013.

Concerning foreign policy, the DPJ has expressed a desire to be more at arm's length from the US, while forging stronger ties with its Asian neighbors.

Despite the nation's unhappiness with the incumbent party, economic data recently released showed that in August Japanese manufacturing activity was at its most robust in nearly three years.

Another piece of good news was that July industrial output outperformed expectations, rising 1.9 percent.

As a result, the yen rose to a seven-week peak against the dollar.

Hiroko Mirafiori, EconomyWatch.com


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