Abe set to transform energy, foreign and monetary policies

December 17, 2012


Japan is expected to reverse course to scrap nuclear power, and take a stronger stand in international disputes under a government led by Shinzo Abe, whose Liberal Democratic Party swept back to power in a Lower House election Dec. 16.

During campaigning, Abe condemned a pledge by the Democratic Party of Japan to shut down the nation's nuclear power plants within three decades as "irresponsible."

The LDP built up Japan's reliance on nuclear power. It was a strong promoter of the industry while it held power for decades until losing an election in 2009.

The party has said it will "reach a conclusion on restarting reactors within three years." The Abe administration is expected to approve firing them up one by one, as and when the Nuclear Regulation Authority certifies them to be safe.

Japan's 50 nuclear reactors were shut down following the disaster at the Fukushima No. 1 nuclear power plant in March 2011. Two have since restarted.

Electric utilities have provided substantial institutional support for the LDP. They have argued for prompt reactor restarts, citing the burden of buying additional fuel for thermal power plants.

"The LDP is closer to our way of thinking," Makoto Yagi, chairman of the Federation of Electric Power Companies of Japan, has said.

Meanwhile, the DPJ government planned to cancel--by withholding approval for--the construction of nine proposed reactors which currently exist only on paper.

The planned reactors include one in Kaminoseki, Yamaguchi Prefecture, where the pro-nuclear camp is confident it will win approval. "The tide will change when Abe becomes prime minister," one representative said.

Over the long term, the LDP will likely maintain nuclear energy. In its campaign platform, the party said it will "within 10 years determine the best ratios of sustainable electricity sources."

The future of nuclear energy is expected to be outlined in the Abe administration's basic energy plan, a declaration of its mid- to long-term energy policy.

The DPJ government planned to draft a basic energy plan in December which would have included its goal of pulling the plug on nuclear power by the end of 2030s. That ambition is now expected to be reviewed.

Also uncertain is the future of reforms to weaken the virtual monopolies of regional utilities and to promote the use of renewable energy.

The DPJ government planned to compile proposals in December for how to separate the power generation and transmission functions of regional utilities and to liberalize the electricity retail industry.

But the LDP has been reluctant to reform the electricity sector in view of opposition from its support base there.

"Under an LDP government, a policy change is unavoidable," a senior industry ministry official said.


The confrontation with China over the disputed Senkaku Islands is expected to drag on under the Abe administration.

During campaigning, Abe accused the DPJ government of accepting a "diplomatic defeat," given the fact that Chinese government vessels are now entering Japanese territorial waters there on a regular basis. China claims the uninhabited islands.

Furthermore, China made its first ever intrusion into Japanese airspace Dec. 13, when a government aircraft overflew the islets.

Japan put three of the Senkaku Islands under state ownership in September, which sparked anti-Japanese demonstrations across China and boycotts of Japanese products.

The leaders of the two nations have not spoken to each other at international meetings they both happened to attend, unable even to hold informal exchanges. How to improve strained bilateral ties has become a key diplomatic dilemma.

In 2006, immediately after he became prime minister for the first time, Abe visited China with the aim of mending Japan-China ties. Relations had deteriorated under his predecessor Junichiro Koizumi because of Koizumi's visits to the Yasukuni Shrine, where war criminals are honored along with Japan's war dead.

The DPJ government has tried to avoid exacerbating tensions. For example, it ordered Maritime Self-Defense Force destroyers to leave a greater distance than usual between themselves and Chinese vessels during patrols near the Senkaku Islands in the East China Sea.

Abe has indicated that he will face up to China more robustly.

He also plans to strengthen the Japan-U.S. alliance as a way of keeping China in check. He is considering visiting the United States at an early date.

The LDP leader has argued that the government should adopt a new interpretation of the Constitution to enable Japan to exercise the right to collective self-defense—in line with a request by the United States.

Lifting the ban on collaborative missions would, for example, enable a Self-Defense Forces vessel patrolling with a U.S. warship to respond if the U.S. ship came under attack.

But it remains unclear whether the Abe administration will be able to take part in negotiations to join the U.S.-led Trans-Pacific Partnership free trade arrangement because of opposition to it within the LDP.

The Abe administration will need to decide whether Japan will ask the International Court of Justice to rule on the sovereignty of Takeshima islets in the Sea of Japan. South Korea, which controls the islands, has refused to cooperate.

And Abe's personal understanding of history may influence his Asia policy.

When he served as prime minister for one year from 2006, Abe kept quiet on the question of whether he would visit the Yasukuni Shrine--out of consideration to China.

Now, however, he has expressed a willingness to do so.

"It was extremely regrettable that I was not able to visit while I was in office," Abe told a debate among party leaders in November.

Also while in office, Abe said there is no evidence purporting to prove the forcible recruitment of so-called comfort women to provide sex to Japanese soldiers during World War II. His stance drew criticism from South Korea and the United States.

Abe, who advocates revising the Constitution, is expected to seek a relaxation of the rule requiring the approval of at least two-thirds of members of both Diet chambers to bring constitutional amendments before the Diet.

But an immediate amendment itself remains unlikely because the LDP and other revision-seeking parties lack the necessary seats in the Upper House.


The Bank of Japan is expected to face more pressure from the Abe administration than from its predecessor to ease credit policy.

Abe has repeatedly called for "bold" monetary easing to drag Japan out of deflation.

Attention is focusing on whether the government and the BOJ will conclude a binding policy accord. Under the BOJ Law, the government cannot interfere with monetary policy.

The LDP has said an accord is necessary to oblige the BOJ to make "unlimited" relaxation of monetary policy with the goal of achieving 2-percent inflation. The BOJ has set its own goal of lifting the consumer price index by 1 percent, compared with the current near-zero level.

In its campaign platform, the LDP said it may seek to revise the BOJ Law, which guarantees the central bank's independence from the government.

BOJ Governor Masaaki Shirakawa is cautious about setting a high inflation goal on grounds that the consumer price index increased only 1.3 percent on average even during the asset-inflated economy of the late 1980s.

However, Abe is expected to insist on this.

In a television appearance Dec. 16, Abe referred to a Dec. 19-20 BOJ Policy Board meeting and said he would watch for indications of whether the BOJ understands the LDP's priorities.

Shirakawa's five-year term will expire on April 8. The appointment of a new governor requires Diet approval and, therefore, the choice of successor could symbolize the overall power shift under way in Japan.

"We want to appoint someone who accepts our requests," Abe has said.

Among the potential candidates are former BOJ deputy governors Toshiro Muto and Kazumasa Iwata, and Keio University economics professor Heizo Takenaka, who served as minister in charge of economic and fiscal policy under Koizumi.

Other names mentioned are Takatoshi Ito, an economics professor at the University of Tokyo's graduate school, and Kikuo Iwata, an economics professor at Gakushuin University.

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LDP President Shinzo Abe at party headquarters Dec. 16, as party officials celebrate victory (Toshiyuki Hayashi)

LDP President Shinzo Abe at party headquarters Dec. 16, as party officials celebrate victory (Toshiyuki Hayashi)

  • LDP President Shinzo Abe at party headquarters Dec. 16, as party officials celebrate victory (Toshiyuki Hayashi)

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