MNI: Japan Abe Wins LDP Head Race; 3rd Term As Prime Minister

     TOKYO (MNI) - Prime Minister Shinzo Abe, as widely expected, won the ruling

Liberal Democratic Party leadership race, capturing 553 of the 807 voters cast

by 402 lawmakers and 405 party members from every prefecture at the LDP.

     The winner of Thursday's election will not only be the next leader of the

conservative LDP, but, as they are the ruling party, Japan's next prime minister

as well.

     That would give the conservative blue-blood politician Abe an unprecedented

third three-year term as the LDP leader, and thus Prime Minister, giving him

more time to push for his life-time ambition of rewriting the post-war pacifist

constitution.

     Abe will most likely continue his signature 'Abenomics', which consists of

monetary easing and fiscal spending. At the same time, he will work on expanding

Japan's working-age population.

     His rival, Shigeru Ishiba, a former Defense Minister, who claimed the

signature 'Abenomics' policy had done little to benefit rural areas, got 254 of

the 807 votes cast.

     --'POLICY WORKING'

     Abe insisted his policy has produced results, such as improved employment

rates and a declining number of corporate bankruptcies. He also emphasized that

tax revenue has risen at both the central and local government levels.

     Abe returned to power in December 2012, leading the LDP to a crushing

victory in Lower House elections. He promised to correct what he saw as an

overvalued yen, overcome years of deflation and lift inflation to a stable 2%,

with the reflationary policy mix of aggressive monetary easing, increased fiscal

spending and structural reforms.

     After more than five years of massive asset purchases by the Bank of Japan,

the annual inflation rate is still under 1% and slow wage growth has left

consumer spending sluggish.

     Prime Minister Abe has said the consumption tax should be raised to 10%

from 8% in October 2019 as scheduled.

     --POLICY NORMALIZATION

     Prime Minister Abe said last week that he would set a course for

normalizing monetary policy before the end of his third term as the president of

the ruling LDP in 2021.

     When asked about Abe's remarks, BOJ Governor Haruhiko Kuroda at a news

conference Wednesday said that the BOJ continues with the current easy policy in

order to achieve the 2% inflation target.

     Kuroda also said he sees no need to review the 2% price stability target,

which was set in January 2013 in exchange for the government's push for fiscal

consolidation and structural reforms. Japan's economy has improved and corporate

profits have risen but inflation still hasn't gained traction.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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