Japan ruling bloc election win could be too big for markets to swallow

By Linda Sieg

TOKYO (Reuters) – A big win for Japan’s prime minister and his allies in a Sunday election would raise concern that the government will switch its focus from a stuttering economy to revising the post-war, pacifist constitution to ease constraints on the military.

Prime Minister Shinzo Abe’s coalition is in no danger of losing power in the election for half the 242-seat upper house, a vote he is portraying as a referendum on his “Abenomics” recipe of hyper-easy monetary policy, spending and reform, amid growing signs the strategy is not working.

Media surveys published on Wednesday showed Abe’s Liberal Democratic Party-led coalition and like-minded parties could win a two-thirds “super-majority” in the upper house of parliament.

That would both allow Abe to assert he has a mandate for his economic policies and let the government begin the process of revising the constitution.

“If the LDP wins big and together with like-minded parties, gets a two-thirds majority, the markets will see that as negative, because concerns will increase that the government will switch from putting priority on the economy to focus on constitutional revision,” said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities.

Abe won a rare second term as prime minister in a 2012 election promising to reboot the long-stagnant economy, but his deeper agenda was to ease the limits of a pacifist constitution to let Japan play a bigger global security role.

Conservatives see the constitution as a humiliating symbol of Japan’s defeat in World War Two and as shackling the military. Its admirers consider it the source of post-war peace and democracy.

Abe has recently played down his goal of changing the constitution but a big win on Sunday could open the door to achieving his long-held ambition, opposition politicians say.

“During the campaign, Prime Minister Abe has not mentioned amendment of the constitution. This is a stealth approach,” Katsuya Okada, leader of the opposition Democratic Party told a recent news conference.

‘ABENOMICS IS STALLED’

The Democratic Party and three small parties, backed by grassroots groups, are trying to prevent the ruling camp and its allies from winning the two-thirds majority.

Amending the constitution requires two-thirds of seats in the upper house and the lower chamber, where the ruling bloc already has a “super majority”, and a majority in a public referendum.

Many voters are also apparently reluctant to see the proponents of revising the constitution win big.

A Jiji news agency survey showed 49.6 percent of respondents did not want to see the LDP-led coalition and its allies win a two-thirds majority versus 31.5 percent who did.

Turnout on Sunday will be closely watched in an election overshadowed by Britain’s vote to leave the European Union, the death of seven Japanese in a militant attack in Bangladesh and a looming city election in Tokyo.

Low turnout could undercut Abe’s portrayal of the vote as an endorsement of his economic policies.

“Even if the LDP wins big, there is a strong feeling that Abenomics is stalled and not many will see this as a positive mandate for it,” Imaizumi added.

The LDP has a shot at a simple majority in the upper house for the first time since 1989, while the LDP and its junior partner are all but certain to exceed Abe’s target of taking a majority of the seats up for grabs, bolstering their grip on the chamber, the media surveys showed.

The opposition alliance is struggling against memories of the Democrats’ 2009-2012 rule when the government was plagued by infighting and policy flip flops.

(Additional reporting by Daiki Iga; Editing by Robert Birsel)