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Shinzo Abe: The answer to ailing Japan's problems?

By Hilary Whiteman, CNN
updated 10:58 PM EST, Wed December 26, 2012
Japan's main opposition Liberal Democratic Party (LDP) leader Shinzo Abe was PM between 2006 and 2007.
Japan's main opposition Liberal Democratic Party (LDP) leader Shinzo Abe was PM between 2006 and 2007.
STORY HIGHLIGHTS
  • NEW: Shinzo Abe is confirmed as Japan's new prime minister
  • This follows sweeping election win by Liberal Democratic Party (LDP)
  • He filled the role for one year before his resignation due to health issues in 2007
  • This time, he's proposing more spending to stimulate the country's economy

(CNN) -- Six years ago, Shinzo Abe started the revolving door of Japanese prime ministers by resigning just one year into the job. The question now is whether he's able to halt it.

Abe's Liberal Democratic Party (LDP) assumed power after incumbent Prime Minister Yoshihiko Noda and the ruling Democratic Party of Japan conceded defeat in the country's general election earlier this month, paving the way for the 58-year old to resume the role he left in 2007.

He becomes Japan's seventh prime minister in six years to take on what is becoming the increasingly difficult task of hitting the economy out of a rough and forging a bright future for an increasingly aging population who feel the best years are behind them.

Read: Japan's parliament picks Abe as PM

Can Abe do it?

The LDP leader is seen as hawkish with a nationalistic bent, and charismatic, if not particularly popular, according to opinion polls.

Tsunami victims on Japan's election
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"People don't necessarily see him as a savior, they see him as a doer," said John Lee, an adjunct associate professor at the Center for International Security Studies at Australia's Sydney University.

"At the very least, he represents a change from the dour, Japanese bureaucrat that is plagued by inactivity. I don't think that could be said about Abe."

Read: Shinzo Abe 2.0:Japan's economic hope?

The son of two politicians, including the former Foreign Minister Shintaro Abe, and the grandson of the late Prime Minister Nobusuke Kishi, Abe grew up with the LDP, and is said to be conciliatory within the party, yet bold enough to speak his mind.

"Everybody may not be happy with what he says, but finally if we have a Japan that actually says what it thinks on the world stage, that'll be good for everybody, especially the Japanese," said Keith Henry, founder of consultancy Asia Strategy.

Abe first rose to power in September 2006, at the age of 52, making him the country's youngest leader in 52 years.

However, the strong support that pushed him up Japan's political hierarchy was eroded over the following months by a string of gaffes and the resignation of several government ministers, some of whom had been accused of financial or electoral misconduct.

During Abe's year in power, his health minister, Hakuo Yanagisawa, came under fire for branding women as "birth-giving machines," and his defense minister, Fumio Kyuma, resigned after hinting that the atomic bombs dropped on Hiroshima and Nagasaki may have been justified.

The day after his resignation, in September 2007, Abe was admitted to hospital with gastrointestinal inflammation.

In the world of Japanese politics anything that is kind of emphatic is quite rare ... I think that demonstrates a new sense of confidence and a sense of who he is, which I don't think existed a couple of years ago.
Keith Henry, Asia Strategy

Fast-forward five years and Abe appears to be fighting fit and ready to take on the job.

Before being nominated as the country's next leader, Abe made what Henry calls "emphatic" statements on the Bank of Japan, government spending and Japan's relationship with China.

In mid-November, he was reported to have taken China to task over its record in Tibet.

"I swear I will do everything in my power to change the situation in Tibet where human rights are being suppressed. Tibet seeks freedom and democracy and we agree on those values," he said.

"In the world of Japanese politics anything that is kind of emphatic is quite rare, and I think that demonstrates a new sense of confidence and a sense of who he is, which I don't think existed a couple of years ago," Henry said.

The prospect of an Abe-led government has had a positive effect on Japan's share market, suggesting there's some confidence in his ability to reinvigorate the economy.

Abe intends to aim his political firepower at deflation, calling for monetary easing by the Bank of Japan to achieve an inflation rate of 2%. He wants the BoJ to buy government bonds to fund a range of public works to stimulate the economy.

In an opinion piece for CNN, Jeffrey W. Hornung, an associate professor at the Asia-Pacific Center for Security Studies in Honolulu described Abe's major economic policies as "reckless."

"Although the BOJ has been pumping money into the economy with a 1% inflation target, Abe's push for unlimited monetary easing and a 2% target translates into pressure on the BOJ. Worse, his suggestion that the BOJ underwrite government bonds is prohibited under the Public Finance Law, a ban that was put in place after World War II," he wrote.

"Both moves indicate his desire to reduce BOJ independence. What is more, Japan is already the second most indebted nation (Zimbabwe is first). Abe's plan to increase defense expenditures and public works spending will make Japan even more indebted," Hornung added.

Abe's foreign policy priority is to strengthen national security by revising the pacifist constitution introduced after World War II. He's expected to take a stronger stand on China, particularly in relation to regional disputes of the kind seen this year over disputed islands in the East China Sea.

The territorial jousting over the Senkaku/Diaoyu islands escalated just days before the election after Japan dispatched fighter jets in response to sightings of a Chinese government plane in airspace around the islands.

"I think there's an overwhelming belief now that China, at the very least, doesn't respond to cooperative behavior. What can be said is that China behaves the way it does regardless of whether Japanese behavior is positive or combative," Lee said.

Then there's the question of how Japan powers itself amid the backlash against nuclear energy following the meltdown of the tsunami-hit nuclear reactors in Fukushima.

The LDP has called for safety tests on all nuclear plants over the next three years. Those that pass should be brought back online, Abe has said.

He'll also have to deal with the enduring task of cleaning up communities shattered by the earthquake and tsunami in 2011, and contend with local anger that the recovery seems to have stalled.

Read: Election world away from tsunami-hit town

Despite all the challenges, some analysts remain optimistic about Abe's ability to put Japan back on track.

"Japan has never looked better to me. I'm very, very optimistic on it," said Ben Collett, head of Japanese equities at Louis Capital Markets in Hong Kong.

"I'm hopeful for the market and the economy and Abe's timing is solid. He'll initiate a cycle of new industrial development -- a rebirth of heavy industry in Japan that includes energy, hi-tech, space exploration and defense industries."

Henry says it should be "fairly smooth sailing" for Abe for next one or even two years if he watches his words on three key areas.

"He's got to be careful what he says about BOJ policy, he's got to be careful geopolitically about how he approaches Japan's "friends" and competitors in the Asia region, and he also has to be careful about putting his own Cabinet together to make sure that a week or two into his Cabinet we don't have any resignations because somebody has done something."

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