TOKYO - Incoming Japanese prime minister Shinzo Abe came out fighting Monday after his sweeping election victory, saying there can be no compromise on the sovereignty of islands at the centre of a dispute with China.
Abe, whose conservative Liberal Democratic Party secured a comfortable win in national polls Sunday, acknowledged Japan's relationship with China was important but stuck to the hard line he pushed throughout the campaign.
"The Senkaku islands are Japan's inherent territory," he told a press conference, referring to an archipelago Beijing calls the Diaoyus.
"Japan owns and controls the islands... under international law. There is no room for negotiation on this point".
But he also struck a slightly more conciliatory note, saying he wanted to "deepen dialogue" with China.
"We need to have wisdom not to turn political issues into economic issues," he said.
Abe's large electoral margin boosted hopes for the country's problem-plagued economy, with investors pushing stocks up as the painfully high yen eased.
The one-time premier has vowed to put the moribund economy back on track after years of deflation, made worse by a soaring currency that has squeezed exporters.
Topping his agenda was a promise to pressure the Bank of Japan into more aggressive easing policies aimed at kick-starting growth as the world's third-largest economy slips into recession.
All eyes will be on the bank's policy meeting this week to see whether the central bankers move in line with Abe's wishes.
Investors are increasingly betting on some action from the central bank, with the yen tumbling against the dollar and euro on Monday while Tokyo's Nikkei 225 stock index surged 0.94 per cent by the close.
Voters on Sunday dumped Prime Minister Yoshihiko Noda three years after his Democratic Party of Japan (DPJ) promised a change from more than half a century of almost unbroken LDP rule. The result cost Noda his party leadership.
The rout was completed by news that the LDP and its junior coalition party New Komeito had secured a large enough majority in the lower house to overrule the upper chamber.
"Control of two-thirds of lower house seats would alleviate concerns about divided control of the Diet's two chambers," brokerage giant Nomura said in a note.
"It is also likely to fuel expectations, particularly among foreign investors, of more expeditious policymaking."
Fukushima operator TEPCO was a big winner on Monday, with its shares rocketing 33 per cent, at the head of a charge by energy firms as investors cheered the likely end to a nascent move to snuff out atomic power.
Anti-nuclear sentiment has run high in Japan since last year's Fukushima atomic crisis, with opinion polls showing a majority of voters want to phase out nuclear power.
But the mood failed to translate into success for parties pushing for an atomic exit.
Analysts, however, say the LDP's victory came by default -- with voters disenchanted by the DPJ after three years of flip-flops, policy missteps and diplomatic drift, but having little faith in any of the alternatives.
With turnout at a record low and voters complaining of no real choice, even Abe acknowledged the result was not a ringing endorsement.
"I think this result means a 'no' to the political confusion of the DPJ. People will be strictly watching if the LDP will be able to live up to expectations."
Abe's offer to boost spending on infrastructure was standard fare from the LDP playbook but chimed with voters in the northeast, where the devastation of the March 2011 tsunami is still evident.
His win stoked speculation that whoever is appointed to replace BoJ governor Masaaki Shirakawa next year will favour a more aggressive easing stance.
"Foreign investors are likely to remain bullish, betting that Mr. Abe will fulfil his promises to turn on the fiscal taps," Kenichi Kubo, senior fund manager at Tokio Marine Asset Management, told Dow Jones Newswires.
He is likely to "pressure the Bank of Japan into much more aggressive asset purchases to pull Japan out of recession and prolonged deflation".
However, Credit Agricole said in a note that "it is not obvious that coalition parties will be as welcoming" to Abe's aggressive policies.
- CNA/ck
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