The Japanese elections have just concluded yesterday, and a major political change has taken place there. The ruling party: Liberal Democratic Party (LDP), which has been ruling for the last 50 years or so (except for a brief period in 1993) has been defeated by the main opposition: Democratic Party of Japan (DPJ).
DPJ won quite easily scoring 302 out of 480 seats in the lower house, and this comes at the back of a 70% voter turnout, which is the highest in the last two decades.
Mr. Hukiyo Hatoyama is the DPJâ€™s leader, and will probably be the next prime minister. He is a PhD from Stanford University, and the grandson of a former prime minister.
As part of his campaign he has promised to increase pensions, scrap school fees and road tolls, reduce taxes for small companies, and pay parents an annual allowance of $3,273 per child.
Japanâ€™s population has actually shrunk in recent years, and the child allowance is a way to encourage people to have babies. The ratio of labor force to the population has also declined with the ageing population, and setting this right seems to be a high priority for the DPJ.
Itâ€™s not the population alone, when it comes to Japan, almost every economic indicator shows stagnation or negative news. The Nikkei 225 peaked at about 38,900 in 1989, and is only about a fourth of that today!
The national debt is over 800 trillion yens, and the debt to GDP ratio is about 200%.
The second largest economy has been stagnating for a while now, and the lost decade of Japan may have ended in 2000, but real growth is nowhere to be seen.
The new government has promised a lot and itâ€™s hard to see how those promises will be fulfilled, given the high debt and low growth. Their manifesto speaks about aligning themselves better to Asia, and the new leadership seems to be looking that way to fuel their future growth. Only time will tell whether an Asian focus will solve their problem, but if nothing changes, itâ€™s only a matter of time that China overtakes Japan as the second biggest economy in the world.
I donâ€™t know whether that will happen or not, but I certainly wish the Japanese good luck.