TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe is poised to cement his hold on power in an election on Sunday, ending six years of parliamentary deadlock with an expected big win in the upper house.
Here are some key issues and dates to watch, to see whether Abe is using his mandate to keep campaign promises for economic reform.
- SALES TAX: Abe's government says it will use April-June GDP data, due August 12, to help judge whether to proceed next April with the planned first phase of doubling the consumption tax to 10 percent over two years. This is considered a vital step toward reining in Japan's massive government debt.
Abe has been guarded on the issue. Any signs that he is delaying a decision beyond October, or listening to calls from some advisers and party members to postpone or water down the initial 3 percentage-point hike, could rattle market confidence in Abe's commitment to getting Japan's fiscal house in order.
- CORPORATE TAX: The government has floated the idea of cutting the 36 percent corporate tax rate to spur growth. But there is no consensus on whether to make an across-the-board rate cut or target tax breaks for companies that aggressively boost investment and employment.
- LABOUR MARKET: Abe says he wants a more dynamic employment system that fosters risk-taking and innovation, but there is strong opposition to moves to make it easier to fire workers. The government in April retreated from even a baby step: a proposal that companies that lose wrongful-dismissal decisions could pay off a fired worker instead of reinstatement. Abe's government is vague on future efforts to reform Japan's rigid labour system. Such reforms would be welcome by financial markets and firms but require the premier to take on vested interests in his own party.
- ELECTRIC UTILITIES: Abe wants to open Japan's electric-power market, now controlled by regional monopolies, and create a national grid to replace the existing two incompatible systems. The government aims to break the monopolies into separate generation and transmission companies by 2020.
Parliament failed to enact the overhauls in its latest session. The bills will be resubmitted in a session expected from October. But reform proponents worry they could get watered down by a powerful utilities lobby.
- FREE-TRADE: Japan joins the U.S.-led Trans-Pacific Partnership (TPP) free-trade talks on Tuesday, coming late to an ambitious negotiating effort in which 11 countries are already racing to seal a pact this year, a deadline many experts find unrealistic.
In deciding to join the talks, Abe faced down fierce opposition from the protected farm lobby, a traditional backer of the ruling LDP. Many businesses say the trade talks will force Japan to make reforms that will boost competition and cut costs. Japan is also in free-trade deals with the European Union, South Korea and China.
If Japan is to sign a final TPP deal, Abe will face extreme pressure to compromise on his promise to preserve very high tariffs on rice, wheat, dairy products and other imports.
- SOCIAL SECURITY: For long-term economic stability, Abe must address Japan's pension system, in which a dwindling number of workers must support a burgeoning elderly population. A government panel is likely to propose in August an eventual rise in the age retirees can start to get benefits, to 70 from 65.
- YASUKUNI SHRINE: Watch whether Abe visits the controversial Tokyo shrine, which honours Japanese leaders convicted as war criminals by an Allied tribunal along with war dead, on the August 15 anniversary of Japan's World War II defeat. Abe wants to recast Japan's historical narrative with a less apologetic tone, and some of his comments have angered China and South Korea, which see the shrine as a symbol of the Japan's past militarism.
Abe visited Yasukuni after becoming head of the Liberal Democratic Party in September but has refrained since becoming premier. If he visits on the war anniversary or during an autumn festival -- favouring his nationalist support base over businesses that want to keep good relations with major trading partners -- this would support the view that an emboldened Abe is showing his true colours at the expense of economic reform.
- CONSTITUTION: Abe's LDP and two small opposition parties want to loosen the grip of Japan's pacifist Constitution, drafted by the U.S.-led Occupation after the war, to allow a more muscular military. The election isn't expected to give them the super-majority needed to submit revisions to a public referendum and the LDP's coalition partner is cautious over change.
Look to see if Abe takes other preliminary steps, such as changing the government's legal interpretation to allow "collective self-defence," for example, shooting down enemy missiles aimed at U.S. territory. A revised defence-policy outline by the end of the year is expected to take a more hawkish tone, including the possibility of obtaining the ability to hit enemy targets in case of imminent attack.
- CABINET: Abe is expected to reshuffle his cabinet in September. Only minor posts are expected to be affected, but a bigger shake-up could signal a shift in direction for the government.
- NUCLEAR RESTARTS: Abe faces potential headaches over whether to restart Japan's nuclear-power reactors, almost all of which remain off-line after the March 2011 Fukushima disaster. Abe favours nuclear power to cut Japan's reliance on expensive foreign energy. But if a safety commission and local governments approve the restart of reactors, expected by early next year, he could hurt his popularity by signing off on restart agreements.
(Reporting by Antoni Slodkowski; Editing by William Mallard and Clarence Fernandez)