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Politics

Abe must shift focus back to beating deflation

TOKYO -- The ruling Liberal Democratic Party's presidential contest has come down to a win by default for Shinzo Abe. While the lack of a policy debate is regrettable, more important is what he intends to do with a renewed hold on government.

     "A robust stock market is the engine of the government," in the words of an aide. So the most fearsome sight for the prime minister this summer was surely not the emergence of a challenge to his re-election, but global equity benchmarks falling like dominoes. The Nikkei Stock Average tumbled under 20,000, closing at a roughly seven-month low Tuesday.

     Three years ago, Abe put forth his plan for conquering deflation with the three arrows of monetary easing, fiscal spending and an economic growth strategy. His cabinet's approval rating became hitched to a weakening yen and the rising share prices that these Abenomics policies produced, putting his government on solid foundations.

     Delving into heated issues, notably expanding Japan's scope for using its armed forces and restarting nuclear reactors, has cost Abe popularity. One may rightly ask why he remains atop the political heap.

     The best answer is that no credible alternative to Abenomics has yet emerged for curing the nation's long-running economic malaise. In a real presidential race, a challenger's worth would become immediately clear if he or she simply peddled a retread of the prime minister's polices.

     Abe could do better on many points, starting with managing relations with South Korea and China and reforming social security. He should also reflect on the criticism he has received for a style of politics that seems to disregard the need to make a case for his policies. The public deserves to be sure that his uncontested re-election does not give him carte blanche.

     The government has shown worryingly little concern over the sorry state of Abenomics now that the first two arrows have flown. It has dragged its feet on coping with the side effects of a weak yen, revitalizing small-town Japan, and balancing the dual imperatives of economic growth and fiscal health. Above all, the third arrow has been underwhelming.

     The prime minister admits that Abenomics is "a work in progress." He has the good fortune to be able to raise fresh political capital from the LDP to spend in lieu of a high approval rating. Let us hope that he takes advantage of this opportunity to refocus and tackle the regulatory wall holding back growth.

     The prime minister once urged a U.S. audience to "buy my Abenomics." Whether such talk resonates with financial markets or voters again will depend on his government's actions from here on out.

     Abe gains another three years as LDP president, but he has less time than that to show results. An upper house election looms ahead next summer. And unlike Abe, LDP candidates will have to fight for their seats.

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