Shinzo Abe's third term as Japan PM may be his hardest yet

Japan Prime Minister Shinzo Abe is heavily favoured to win a Sept 20 vote to lead the ruling Liberal Democratic Party for another three years. PHOTO: REUTERS

TOKYO (BLOOMBERG) - After two terms of mixed reform results, Prime Minister Shinzo Abe is vowing to tackle some of Japan's most intractable problems in the third.

Mr Abe is heavily favoured to win a Sept 20 vote to lead the ruling Liberal Democratic Party for another three years, with one local newspaper poll showing 87 per cent of eligible lawmakers favouring his return.

The Prime Minister and his only rival, former defence minister Shigeru Ishiba, registered their candidacies on Friday (Sept 7) in Tokyo, marking the official start of the campaign.

In recent weeks, Mr Abe, 63, has signalled plans to follow his "Abenomics" policies of monetary easing, fiscal stimulus and structural reform, with a more controversial agenda focused on demographic issues.

But the Prime Minister's record of watering down proposals after resistance from the public, and vested interests, has left many sceptical about his resolve to see it through.

"It's been characteristic of the Abe government for the last three or four years that they say all the right things," said Mr Robert Feldman, a senior adviser at Morgan Stanley MUFG Securities in Tokyo.

"Somehow, the budget and the actual laws they pass don't get them towards the things they say they want to do."

Spooked by a labour shortage crippling sectors such as elderly care, Mr Abe's pushing to crack open Japan's restrictive immigration laws. He has pledged to create a new residential status for lower-skilled foreign workers next year that would accept labourers for limited stays without their families.

The existing foreign "intern" system has been dogged by allegations of forced labour. In an essay published by Hanada magazine last month, Mr Abe said foreign workers must be paid the same as their Japanese counterparts and be protected from exploitation. Still, he argues it's not "immigration" because they can't stay.

Retirement Age

Jobs for life could become more common in Japan, if Mr Abe gets his way. In an interview with the Nikkei newspaper this week, the Prime Minister said he wanted to focus the next year on creating an environment for people to stay working throughout their lives. That could mean bolstering opportunities for mid-career job changes and encouraging people to stay on past 65.

Japan already has a relatively high proportion of elderly workers, including about 30 per cent male and 16 per cent of female senior citizens.

Social Security

Mr Abe is counting on keeping more elderly people in the labour force in year one of his next term. This is essential to the healthcare and social security overhauls he is planning in years two and three.

Mr Abe told the Nikkei that he was considering allowing workers the option of delaying pension payouts past the age of 70, in exchange for higher monthly payments when they do.

The Japanese already have among the world's longest life expectancies - at about 87 years for women and 81 years for men - and Mr Abe said he wants to promote lifestyle incentives to lengthen healthy life spans.

Sales Tax

Mr Abe is also seeking to raise the consumption tax to 10 per cent from the current 8 per cent in October next year. The last increase to 8 per cent in 2014 triggered a recession, leading Mr Abe to twice delay a second hike.

He told the Nikkei that measures like exempting food from the next increase would help deflect another economic hit.

Constitutional Amendment

Mr Abe pledged in a policy pamphlet distributed to party lawmakers ahead of the election to push ahead with a controversial plan to change the pacifist provision of the country's post-war Constitution. He said he would seek to present the LDP's amendment to the next session of parliament and push for an early vote.

The plan faces a rocky road: Mr Natsuo Yamaguchi of Mr Abe's coalition partner, the Komeito Party, said last month that he didn't think there had been much progress on consensus-building to support the plan.

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