Impact of Japan's Elections

" unemployment rate rose to an all time high in July deflation has intensified and spending is. -- down not a recipe for success for Japan's ruling Liberal Democratic Party. Which faces reelection this Sunday. Now at stake the United States are changes in trade policies in the status of the United States is military bases. If there is ultimately change in power from the more I'm joined by. In India and I should say by Hugo was stalling is Hong Kong I should say. I think that far eastern economic review editor in Hong Kong. And -- spent a senior fellow for Japan's studies with the council on foreign relations she joins me from Washington DC good morning guys. Good morning. He'll let me start with you what had happened to the Nikkei in expectations. Of this Sunday's election."

" To be perfectly honest I have not been following the Nikkei today what has been doing -- the issue -- can can talk to."

" Sheila how how the markets locally reacting or preparing for what could be a major change in leadership. Well I think there's an awful lot of trepidation in Japan at the moment. This is after all and real test. Of the Japanese public's confidence in the government and according to all opinion polls. The opposition party the Democratic Party of Japan is expected to take at least 300 of the 480 seats in Japan's legislature. -- the Liberal Democrats are are headed for a major defeat on Sunday. Simpson Hugo for people who don't know a lot about local Japanese politics the Liberal Democratic Party is seen power. There is -- Democrat party leadership which could be the one to take over. What they called the LDP there what would that do. The to shake up in Japan both economically and politically."

" Well one of the big things is that the TP -- has met a lot of promises to the voters in terms of spending on benefits. And that so that is conceivably going to put even more strain on on Japan's. Already very perilous public finances. Fundamentally I don't think that that there's a huge difference between the two parties. In terms of their underlying philosophy. So. You know. The question is really whether. The TPJ's populism that it used to get to to get elected. Is going to cause problems or on the road."

" that -- I understand that there aren't some underlying issues with the existing party and those date back to issues related to pensions. Exactly I think the last the last upper house election. In 2007. -- LDP really started to lose the public's confidence and month month must most of -- critique against the LDP at that time. This video about mismanagement of the pension fund. And I think today you see that social welfare social insurance issues at the top of most Japanese -- priority -- in terms of the issues that are going to motivate their vote. On Sunday. Second quarter issue of course for all of us but in Japan as well this this question of unemployment. You're opening night your opening stories suggest that the Japanese unemployment would rise to five point 7%. But that doesn't seem so bad compared to the United States but in Japan that the terribly high number and many Japanese households are very very worried. About the volatility in the employment market. And they're worried I presume Hugo me nearing Hong Kong U of a better sense of what's going on their politically when you look at what's happening with GDP over there. Some of the economic indicators. Things do not look terrific agreed to the global economies in recession but. What are people saying there on the ground about a potential change."

" Both Japan. You know has been an a very long periods of and -- stagnation. Word recession and then slow growth really since the bursting of the bubble around 1990s so. I'm you know what they really need to do is to grow out of some of their problems -- you two can stimulate growth. In order for the government to ever have a chance of servicing the huge debt it has. To to be able to support these high numbers of retirees. So really what we've -- the new government needs his programs policies but they haven't they haven't really articulated that kind of program mean. The I think through with the voters the voters want change but they're not really clear on what sort of change they want they know that the LTP is. It's incompetence and sort of tradition bound and tied to all of its traditional. Vote basis. But whether the DP table really offer anything different. This is yet to be seen and I should -- have about the unemployment. The way that Japan calculates its unemployment. Tends to produce lower numbers suffer people in the US thinking that five point 7% and unemployment is not a big deal. You know it was calculated more in the way that the US does it would probably be more on the order of 9%. Very."

" And hire them okay great and not good but down but thank you got to bring us up to date we'll keep an eye -- those elections Hugo and Sheila thank you very much. Coming up."