LAST December, when Japanese voters threw out the left-leaning Democratic Party of Japan (DPJ), commentators warned of rising tensions with China as the incoming conservative government headed by a hawkish prime minister took a tougher line on territorial rows. But amid all the hand-wringing, two more subtle points about the election campaign and its aftermath were largely overlooked.

The first refers to the extent to which the policies advocated by both the right and left of the Japanese political spectrum share increasingly little common ground with their Western counterparts. The second has to do with the way the poll result could encourage business leaders to follow the government by turning their attention towards South-east Asia. 

Japan’s confusing political fault lines have been around for some time, but the election underlined the point in a way that made them difficult to ignore.

The trend really began in September 2011, when Mr Yoshihiko Noda replaced Mr Naoto Kan as prime minister of the ruling DPJ government. A fiscal conservative, Mr Noda spent far more time trying to shore up the government budget and rein in public debt than developing the sort of big- spending social assistance programmes that left-wing governments are often associated with. Indeed, he staked his political career on raising the politically unpopular consumption tax rate.

Mr Noda’s administration was also known for its disregard for global warming – another issue generally closely associated with left-wing politics in the West.

If Mr Noda’s policies were hard for left-wingers outside Japan to swallow, a key reason for the Liberal Democratic Party’s (LDP’s) overwhelming victory last December must have been equally incomprehensible to Western conservatives. LDP leader Shinzo Abe’s support for nationalistic foreign policy stances, as well as his controversial demands for reforms in both the Constitution and the education system, received little attention during the campaign.

The main issue was the LDP’s plans to revive the economy and end deflation. But unlike his Western counterparts, Mr Abe did not advocate austerity measures to help bring down the national debt. The focus instead was on the need for an extra spending stimulus and a “bold monetary policy” to revive the economy.
In other words, Japanese conservatives were advocating big government of the sort that would leave their counterparts in Europe and the United States aghast.

Japan’s debt is about equal to 230 per cent of its GDP, higher than that of Greece (175 per cent of GDP) and nearly twice that of Italy (125 per cent). With the debt overwhelmingly in Japanese hands, and Japan’s overseas assets about equal to its debts, the country’s situation is different from that of Europe.
Even so, Tokyo’s maverick stance may not go down well in other global capitals at a time when international cooperation is essential for economic recovery.

This brings us to the second point about the poll. Regardless of the wisdom of Mr Abe’s economic policies, they are likely to have global repercussions; South-east Asia could be among the chief beneficiaries. This will likely become evident in the second and third quarters when the Japanese economy begins to feel the full impact of the planned stimulus.

Long-term structural trends are pushing Japanese firms to invest overseas. With more liquidity being poured into corporate coffers, this trend should accelerate.

Now that Mr Abe has taken the reigns of power, additional Japanese investment in China involves political risks few corporations are likely to consider. But South-east Asia presents no such problems. Indeed, Tokyo can be expected to support such a development as a way of currying favour with nations it sees as potential allies against the perceived threat from China.

Australia, already the third-biggest destination for all Japanese investment worldwide after Europe and the US, may also get a piece of the action.

Significantly, the first overseas trip by new Foreign Minister Fumio Kishida was to the Philippines, Singapore, Brunei and Australia. And earlier this month, Mr Abe visited Vietnam, Thailand and Indonesia, with the aim of deepening economic ties with the fast-growing region.

Mr Abe was seen pushing high- speed rail systems in Bangkok and nuclear power plants in Hanoi. In Jakarta, he met Indonesian President Susilo Bambang Yudhoyono and discussed bilateral relations in trade, investment, infrastructure development, tourism and employment. Not surprisingly, China’s maritime claims were on the agenda in all three countries.

Last December’s election did more than change the diplomatic situation in North-east Asia.

(C) Singapore Press Holdings Limited