Japan’s Liberal Democratic Party takes power, economic fears return

Following a three-year removal from power by its conservative rivals, the Liberal Democratic Party of Japan (LPD) has returned to the Asian island nation's government. Some are hopeful that the party, which previously ruled for generations in Japan's post-war history, will be able to revive an economy wracked by low growth and astronomical government debt. Others, however, are fearful that the institutional problems that swept the LPD out of office in an enormous loss will create a new host of issues in the coming months.

Shinzo Abe, the former LPD prime minister, was voted into power by Japan's Diet, the offical name of its legislature. According to media reports, he won the support of both his party and a smaller ally that will join his government as a coalition. Another previous prime minister, Taro Aso, has joined the administration as finance minister and deputy PM.

This appointment, including others from previous LPD cabinets, has led some market observers to feel skeptical about their ability to push through positive reform measures. During the election, Abe promised a stimulus package in excess of $100 billion to refuel the economy. Additionally, he called on the nation's central bank, the Bank of Japan, to significantly increase its quantitative easing efforts to keep bond yields low.

"Aso's challenge will be to pursue an expansionary fiscal policy without triggering a rise in bond yields," Mari Iwashita, a bond analyst based in Tokyo, told Bloomberg Businessweek in a recent interview. "It seems the LDP isn't paying much attention to the bond markets. It's possible that ratings companies may signal a downgrade as a warning."

Due to Japan's importance in the global economy, both as a major center of finance and technology businesses, volatility in its bond markets could cause a rippling effect in other areas. As such, it's important to both stay aware of these issues and to pursue alternative investment methods as well. To learn more, visit GreatWealthStrategies.com today.