Sunday, September 24, 2006

Shinzo Abe to Lead Japan

Sources: The Economist; The Daily Yomiuri; China DailyInternational Herald Tribune

Shinzo Abe won the leadership of his party this week by a wide margin, and could signal a major shift in Japanese policy from his predecessor, Junichiro Koizumi, when he takes office as prime minister on September 26th. At 52, he is the second youngest leader in the history of post-war Japan, he may be ushering in a period of efficient government, growth, tax cuts, along with hard-line stances against North Korea and a possible dethawing of icy relations with China.

Abe has already been rumored to be proposing sweeping changes for the Japanese business world. The Yomiuri Shimbun, the most widely circulated paper in Japan, is reporting that Abe will propose 600 billion yen (approximately 5 billion) in corporate taxes for fiscal year 2007. Other proposals include a preferential taxation system for those who invest in venture-capital enterprises, compressing the taxable profit ranges, and overall reduction of the corporate tax burden. These programs are all aimed at improving productivity and attaining economic growth of 3%.

One of Abe’s biggest successes could likely be a dethawing of relations with China, as China has already “opened the doors of peace” for him. China blames the current state of relations with Japan on outgoing prime minister Koizumi, highlighted by Koizumi’s visit to the Yasukuni Shrine—which honors war criminals among its war dead. The dethawing of relations are key for the Asian-Pacific rim economy, especially since there are strong and prosperous business ties between the two major Asian powers.

However, this may prove to ultimately difficult, as Abe came to power on the platform of “raising Japan’s international stature” along with making the Japanese military a more prominent part of Japanese society. This can prove dangerous, states Hiro Katsumata, a research fellow at the Institute of Defense and Strategic Studies in Singapore, “given China’s growing clout in the region.” Abe has stated that Sino-Japanese relations need to be mended and strengthened due to Japanese dependence on Chinese trade—but his may prove difficult due to tenuous relations between Japan and North Korea as well as growing economic and resource war between the two nations.

As Abe takes power, what will happen to the balance of power both economically and militarily in Asia? Furthermore, Abe has taken hard-line stances with North Korea—will this result finally in breaking the tensions between North Korea and Japan? Or, will it lead the two nations towards an era of extreme brinksmanship?

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