"We have been made a fool of by the Democrats, which opposed the dam for the sake of opposing whatever the LDP had promoted"
- Kinya Takayama, mayor of the town of Naganohara
The world's third biggest economy is going to have parliamentary elections on Sunday, a sign that a major policy shift towards delivering higher growth and inflation may be seen soon. Japan's economy slid back into recession for the fifth time in 15 years in the third quarter of 2012, adding more pressure on the nation's next Prime Minister. The election winner will become Japan's seventh Prime Minister in seven years, and it is widely expected that Liberal Democratic Party led by a former Prime Minister Shinzo Abe is poised to head the government. Abe pledged his readiness to boost public works and is ready to spend ¥200 trillion ($2.4 trillion) on projects over the next decade, which is around 40% of nation's GDP.
"Mr. Abe and his advisors may believe that all they have to do once their anti-deflationary policies succeed and JGB yields start to rise is have the BOJ buy more bonds. However, bank reserves under quantitative easing have risen to a level capable of fueling a 500% inflation rate, in which case the BOJ would have to sell, not buy, JGBs," said Nomura economist Richard Koo.
"We have been made a fool of by the Democrats, which opposed the dam for the sake of opposing whatever the LDP had promoted," said the town's mayor Kinya Takayama. "Most local residents want the LDP back."
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