Entering 2012, we were staring at a host of critical elections and transitions in countries that represent about half the world’s gross domestic product. You would think those elections and political handovers would have been some of the most important events of 2012. Yet they were largely red herrings.

In China, the consensus view is that even with a change of leadership, China is largely the same as it was; if anything, the Chinese leadership has doubled down on the approaches of its former government. In Russia, Vladimir Putin went from running the country as prime minister to running the country as president. And in the US, Barack Obama swatted aside Mitt Romney while Congress remained divided, making four more years of the status quo likely. Yet in one major economy an election really did matter, and really will change the way a country behaves in the global arena. That place was … Japan.

At the beginning of the year, this notion seemed preposterous. Japan has had 18 prime ministers in 23 years, a modern-day Asian record. How important could a Japanese election be? Yet the election that just saw Shinzo Abe return to the prime minister’s office was a statement about the kind of country Japan wants to be for the next few years. And it has major implications for the US, China and others.

Abe’s party, the Liberal Democrats, defeated the ruling Democratic Party of Japan in a landslide, capitalising on several years of ineffective government by the DPJ. A faltering economy, mismanagement of the nuclear aftermath of Japan’s 2011 tsunami and a growing national debt all doomed the DPJ. But the election showed something else about Japan: it is increasingly nationalistic.

Along with the Liberal Democrats’ victory, a new party, the Japan Restoration Party, made significant headway, winning dozens of seats to become the third-strongest bloc in Japan’s lower house. The Restoration Party wants to remilitarise, rip up the US-brokered Japanese constitution and install a federalised system that would break Japan up into self-governing regions. There’s a real nativist streak at work. That sentiment helped Abe rise back to power. While not as stringent as the Restorationists, he is a comparative hawk on China, talking about “escaping the postwar regime” brokered by the US and boosting defence spending. In its economic policy, too, his government will be meaningfully different from the Democratic Party’s, with a higher inflation target and a preference in favour of stimulus. Japan, unlike its peers in the rest of the world, has a definitively different steward.

Nowhere will that matter more than in Japan’s relationship with China. Like Japan, China is unhappy with the status quo. Over the past year, China has increasingly laid claim to the Diaoyu/Senkaku Islands, which Japan thinks belong to it. Just last week a Chinese fighter jet went into Japanese airspace for the first time since 1958. Amid all this, Japan’s response has been increasingly nationalistic, as best evidenced by Abe’s re-election. After his party’s victory, Abe said, “The Senkaku Islands are inherently Japanese territory.”

The next logical step for Japan is to engage with other countries that are concerned about China’s rise.

Reuters