By Nicholas Szechenyi

Editor’s Note: The CSIS Asia Team is writing a series of analyses that forecasts key issues and challenges in the Asia-Pacific. Here Nick Szechenyi concisely assesses prospects for Japan’s political stability, economic strategy and foreign policy in 2013. Want more analysis? Plan to attend the CSIS Asia-Pacific Forecast 2013 event on January 29 in Washington D.C. or watch the webcast live online.

Is political stability on the horizon?

Japan recently produced its seventh leader in six years and a fundamental question is whether the resurgence of the Liberal Democratic Party (LDP) and Prime Minister Shinzo Abe, who served previously from 2006-2007, improves the prospects for political stability.

The LDP won the December 2012 Lower House election in a landslide but exit polls showed that was largely a referendum on the relatively inexperienced Democratic Party of Japan (DPJ), which assumed power for the first time in 2009 but failed over three years to articulate a cohesive policy agenda.

Abe must sustain enough momentum to secure an LDP majority in an Upper House election scheduled for July, after which a period of relative stability could follow. But voters soured on the LDP three years ago for its failure to revive the economy and Abe’s economic agenda is therefore a subject of great scrutiny.

What’s in store for the economy?

Abe’s strategy emphasizes fiscal stimulus in the form of increased public works spending and monetary easing to combat deflation.  The new government can also be expected to devise an energy strategy that gradually reduces reliance on nuclear power but stops short of eliminating it from the energy mix entirely absent sufficient supply from alternative sources.

Less clear is the degree to which the LDP might be willing to tackle questions of reform including deregulation, immigration, and trade liberalization that could help chart a path to sustainable growth.  The recent cycle of political instability in Japan has placed a premium on short-term tactics but the public is starving for leadership and this year could feature a more substantive debate on economic policy.

How about regional diplomacy?

Japan’s relations with China and South Korea will figure prominently amid tension over contested territories. Abe has made statements in the past on sensitive historical issues that have also garnered attention.

The question is whether he chooses over the course of this year to pivot to the center as he did during his last term as prime minister, when he oversaw significant improvements in Japan’s relations with Seoul and Beijing. Abe has expressed interest in strengthening partnerships with Australia and India and has already begun outreach in Southeast Asia to further Japan’s diplomatic profile in the region.

And security policy?

Abe has pledged to reinterpret Japan’s constitution to exercise the right of collective self-defense and thereby facilitate coordination and interoperability with the U.S. military and potentially other partners in the region.

The Abe government also is expected to increase defense spending and initiate a review of defense policy this year to further define Japan’s leadership role in regional and global security. A key variable in this context is whether the resulting strategy, unlike previous efforts, will be sufficiently resourced in the face of sluggish economic growth.

Bottom line?

The Abe government in Japan will offer new policy prescriptions to confront economic stagnation and a rapidly changing security environment, possibly a prelude to another extended period of LDP rule.

The potential for renewed leadership on economic and security issues is encouraging and bodes well for U.S.-Japan cooperation as the Obama administration pursues a strategic rebalancing toward the Asia-Pacific region that rests fundamentally on the strength of its alliances’ relationships. An end to political paralysis would undoubtedly create space for a strategic vision to emerge that projects confidence and optimism about Japan’s future.

Mr. Nicholas Szechenyi is deputy director and senior fellow with the Japan Chair at CSIS. To learn more plan to watch the CSIS Asia Pacific Forecast 2013 event here on January 29 via live webcast online and keep an eye out for #Asiapalooza on twitter.