Japan steers clear of ‘fiscal cliff,’ plans December elections

Japan appears to have steered clear of its own “fiscal cliff” as lawmakers agreed to pass a crucial budget bill that would prevent the government from running out of money this month.

Opposition lawmakers had stalled the budget bill to press Prime Minister Yoshihiko Noda to call elections, a step likely to put him and his party out of power. The political brinksmanship had alarmed Japanese pundits and observers, who fretted that the two sides were playing a “game of chicken” over the financial future of the country.

Ultimately, the opposition Liberal Democratic Party backed off first, agreeing to pass the budget bill. On Wednesday, Noda said he could dissolve the parliament as soon as Friday, Japanese media reported, part of a deal in exchange for cooperation on reducing the number of seats in the parliament. The next election is now slated to be held Dec. 16.

The decision challenges the widely aired belief that Noda and his Democratic Party of Japan had wanted to hold off elections as long as possible in an attempt to redeem his slumping ratings. Instead of giving him a chance to recover, “further postponement of the dissolution is likely to cause an increasingly steep decline” in approval, Yomiuri Shimbun reported this week as the decision was announced.

Though the opposition is eager for elections, it’s not clear that they will triumph at the polls, some analysts say. The result could be a coalition government that tries to balance the leading parties. Others believe that the election is likely to push Japan further right and toward more aggressive confrontation with China, as opposition leader and former Prime Minister Shinzo Abe is ushered into power.

That possibility sent the yen tumbling Wednesday amid speculation that a victorious opposition would push its central bank to be more aggressive on monetary easing, Bloomberg reported.

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