Hawkish Liberal Democratic Party of Japan Retakes Helm

Hawkish Liberal Democratic Party of Japan Retakes Helm

By Tim Daiss

A paradigm shift is afoot in Japanese politics that has already sent shock waves across the East China Sea to China as well as impacting nuclear energy in Japan. It will also have a ripple effect on LNG markets in Asia.

On Sunday night Japan’s Liberal Democratic party (LDP) retook the reigns of government after a three-year hiatus. In a general election, the LDP won 294 seats in the Lower House of parliament, running on stronger defense, conservative nuclear energy policy and promises to pull Japan out of recession and deflation

The LDP and its ally the New Komeito Party will form a coalition government and together will control 325 seats of the 480-seat house, securing a two-thirds majority that will make it easier to push through its agenda.

Several threads run through the LDP victory. First, they won under the leadership of former Primer Minister Shinzo Abe who resigned in 2007 after just a year in office. Slated to become prime minister again on December 26, he is back and more hawkish than ever.

As exit polls came in on Sunday indicating a LDP landslide, Abe took aim at China who is locked in a bitter dispute with Japan over the Diaoyu/Senkaku island chain in the East China Sea.

At a press conference, Abe said that the islands were Japan’s “inherent territory,” and that it was his party’s objective to stop the challenge from China. He added however that both sides needed to share the recognition that having good relations is in the national interests of both countries.

Abe has also promised to rewrite Japan’s post-war pacifist constitution, something he advocated when he was prime minister. Such a move would upgrade Japan’s Self-Defense Forces, which currently have limited offensive capacity, into a national army, a move that would no doubt infuriate many of Japan’s Asian neighbors that suffered under Japanese militarism in the 1930’s and 1940’s. On the other hand it would be welcome news for the US, which needs all the help it can get to check Chinese aggression in region.  On Tuesday Abe confirmed that he will meet President Obama during his first official visit abroad in January.

As soon as elections results came in, so did China’s response. Xinhua, China’s official news agency performed some editorial magic and simply failed to mention Abe’s entire election night remarks but only reported on his last comment. The paper’s headline read, “Abe says LDP to improve relations with China.”

However, China’s Global Times, which often has more latitude in its reporting than Xinhua, pulled no punches. In a commentary titled “Abe must be more than an angry leader,” they said that there are two limitations that Abe has to deal with. One is rising Japanese nationalism. The other is China’s rising strength and that “Japan’s economy is dependant on that of China’s.”

“Right after Abe’s win, he claimed that the Diaoyu Islands belonged to Japan. Such a hasty acclamation is pandering to the first limitation,” they wrote. “The two [limitations] have opposing impacts on Japan, and Abe is likely to seek a balance between the two.” The article concluded advocating an even stronger stance against Japan over the disputed islands.

However some Japan experts think Abe’s tough stance may backfire.

“On the one hand, Abe’s rhetoric has been even more assertive and hawkish than before, during his last stint as prime minister, which raises the risk that he will not be as free to manage Sino-Japanese relations pragmatically as he did in 2006-2007,” Tobias Harris told Energy Tribune late Sunday just after Japanese media predicted a LDP victory. Harris previously worked for the office of Keiichiro Asao, a member of the House of Councillors of Japan, (the upper house) and is now a PhD candidate in political science at MIT.

“There is a danger that he [Abe] will be trapped by his own rhetoric,” Harris said.

Harris added that focusing too much on national defense and the constitution is what led the Abe government to defeat in the 2007 upper house election and that expectations are, at least until the coming upper house elections, that the Abe government may try moderation and focus on bread and butter economic issues.

Another and perhaps even more important development from the LDP win and an Abe led government is Japan’s nuclear energy policy.  Nuclear energy was a major issue in the election and a divisive one at that. Since the Fukushima nuclear crisis in March 2011, only two of Japan’s 50 nuclear reactors are online.

The LDP is expected to reverse course to scrap nuclear power. During the campaign Abe condemned a pledge by the ruling Democratic Party of Japan to shut down the nation’s nuclear power plants as “irresponsible,” according to The Asahi Shibun. It was the LDP, in power for decades until losing control in 2009, which built up Japan’s nuclear program.

Not surprisingly, Japan’s electric utilities were strong LDP backers, arguing for prompt restarting of Japan’s reactors.

Restarting Japan’s reactors, even if on a graduated scale, will have major implications for global LNG markets. Since Japan’s shut down of most of it nuclear reactors, the country has become the largest LNG importer in the world in efforts to run its electric utilities.

But that has hit hard at Japan’s coffers. LNG in Asia (which is still tied to oil prices) is expensive, more than three times the price of natural gas in North America where prices are mostly tied to supply and demand. This has sent Japan on a natural gas seek and find mission across the globe.

Japan’s ten regional power utilities imported almost 4.5 million tons of LNG in October, up from 3.9 million tons for the same period last year. If an Abe led government makes good on its nuclear program promises, those figures will eventually fall, proving more energy security for Japan and also shaking up the LNG market in Asia and even globally.

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