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Japan's new PM to pressure central bank on monetary stimulus (+video)

Shinzo Abe, elected over the weekend, also wants to improve relations with China while remaining firm on the islands dispute. Meanwhile, the yen has slipped, post-election, in financial markets Monday.

By Leika Kihara and Kaori KanekoReuters / December 17, 2012

Japan's new prime minister, Shinzo Abe, right, of the Liberal Democratic Party, and the party Secretary-General Shigeru Ishiba pose for photos as they place a rosette on the name of one of those elected in parliamentary elections at the party headquarters in Tokyo Sunday, Dec. 16, 2012.

Junji Kurokawa/AP

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Tokyo

Japan's next prime minister, Shinzo Abe, buoyed by a landslide election victory, piled pressure on the central bank on Monday as it prepared for a policy meeting, saying voters had overwhelmingly backed his call for aggressive monetary stimulus.

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Newly-elected Japanese Prime Minister Shinzo Abe says he will remain firm with the Chinese over disputed islands off the coast of both countries.

Abe said once he formed his cabinet on Dec. 26, he would instruct ministers to produce a joint statement with the Bank of Japan (BOJ) that will give it a 2 percent inflation target, double the current goal.

The ex-premier, who won a second chance to lead the nation when his conservative Liberal Democratic Party (LDP) surged back to power in a Sunday election, also vowed to improve what he called strategic relations with China while standing firm on the sovereignty of islands controlled by Japan but claimed by China.

Abe campaigned with a call for "unlimited" monetary easing by the BOJ and promising a surge in public spending to snap the world's third-biggest economy out of its fourth recession since 2000, and persistent low-grade deflation.

"It was very rare for monetary policy to be the focus of attention in an election, but there was strong public support to our view," Abe, wearing a black suit and a pink tie, told his first post-election news conference. "I hope the Bank of Japan takes this into account (at its policy meeting this week)."

The NHK public broadcaster said the LDP had won 294 seats in the 480-member lower house. Its ally, the New Komeito party, won 31 seats, giving the two the two-thirds majority needed to over-rule most matters in the upper house, where no party has a majority. Turnout was a post-war low of just above 59 percent, according to media estimates.

Security policy and strained relations with Japan's neighbours were also key themes of Abe's campaign and the conservative leader reiterated there was no doubt that uninhabited East China Sea islands were Japanese.

He vowed to work "persistently" to improve relations with China through dialogue, calling for a strategic approach, putting ties with China in the context of Japan's relations with the United States and the Asia-Pacific region.

"We need to deepen ties with the rest of Asia including India and Australia, and not only diplomatically, but in the fields of security and energy, before starting to work on improving ties with China," Abe said.

While Abe is expected to make his first trip to Washington early next year, the immediate focus is on his promises of big-scale monetary and budget stimulus, dubbed "Abenomics".

The first instalment is due this week, with the BOJ seen boosting its asset-buying programme at the end of its two-day meeting on Thursday. That would mark its fifth policy easing since it adopted a 1 percent inflation target in February and vowed to step up efforts to end deflation and shield the export-dependent economy from the impact of a strong yen and the global economic slowdown.

NOT ENOUGH

But Abe has been saying it was not enough, calling for more vigorous steps.

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