The smallest elections often have the biggest repercussions. Japanese Prime Minister Shinzo Abe might want to ponder that as he considers what went wrong in Nago, Okinawa (population 62,000).

Abe’s Liberal Democratic Party failed to dislodge incumbent Mayor Susumu Inamine in Sunday’s contest, putting Japan-U.S. relations at risk. Inamine has pledged to block the relocation of a U.S. air base to his district, something that Abe had assured Washington was a done deal. Apparently not.

The question now is what the LDP’s setback in Nago says about a Feb. 9 election in Tokyo, one that could topple a central pillar of Abe’s economic program.

Morihiro Hosokawa, prime minister from 1993 to 1994, is running for Tokyo governor, arguably the second-most influential job in Japan. The LDP’s knives are out for him: Shintaro Ishihara, Tokyo’s popular governor from 1999 to 2012, has flatly declared Hosokawa isn’t qualified for the job.

The establishment’s real gripe with Hosokawa has less to do with his credentials than his policies, which threaten Japan’s nuclear-industrial complex ― the LDP’s political base. This “nuclear village” is at the root of the cronyism, corruption and inertia that continue to prolong Japan’s malaise and dent its competitiveness.

Abe’s surrogates are trying to paint Hosokawa as some kind of crazed Japanese Che Guevara who would drag the nation backward with his green policies. But in Hosokawa’s corner stands none other than Junichiro Koizumi, Abe’s political mentor and the nation’s most celebrated economic reformer in decades ― hardly a Marxist.

In all the excitement over Abenomics and Tokyo hosting the 2020 Olympics, it’s easy to forget the nuclear-disaster zone 135 miles away. Radiation has been leaking from the crippled reactors at Fukushima for going on three years now, and nuclear sludge is contaminating groundwater and the Pacific Ocean. How much? We don’t know. The hapless Tokyo Electric Power Co., which owns the power plant, has consistently hedged the truth about the disaster, enabled by the government. Abe’s new national secrets bill ensures we will know even less.

Hosokawa and Koizumi are doing Japanese a favor by highlighting the crisis. If the 2011 earthquake that damaged Fukushima demonstrated anything, it’s that Japan’s 54 reactors have no place in such a seismically active nation. The tragedy also helped expose the nuclear village ― a network of power companies, regulators, bureaucrats and researchers that holds great sway over Japanese elections and media.

Just like Hosokawa, the two prime ministers prior to Abe, Yoshihiko Noda and Naoto Kan, hail from the Democratic Party of Japan and sought to rein in this pro-nuke cabal. Noda, for example, pledged to phase out nuclear power by 2040. When the LDP returned to power in December 2012, Abe’s first act was to scrap that plan.

Why? It’s the easy road. Revitalizing a bloated, aging economy is harder when energy costs are rising. The difficult route would be to find an alternative to nuclear power. It would also be the more lucrative one.

In October, Koizumi turned on Abe and the LDP and called for a reactor-free Japan. The former prime minister has argued that devising and selling alternatives to nuclear power could be the ultimate growth industry. At the moment, Abe is traversing the world hawking nuclear technology for Hitachi Ltd. and other companies. But launching a new generation of renewable-energy companies could create millions of jobs and unprecedented wealth.

When it comes to energy efficiency and conservation, few places can trump Japan. Why not harness those capabilities to raise living standards? All Abe is doing is doubling down on the last 20 years: pumping money into a tired economy, building more bridges and highways, and bailing out Sony Corp. with a weak yen.

Hosokawa and Koizumi are thinking bigger. It would be oddly poetic for Japan ― the only country that has suffered a nuclear attack ― to rid our planet of an energy source that from Three Mile Island to Chernobyl to Fukushima has proven itself to be anything but safe, clean or cheap.

Unless we can construct reactors out of rubber or elevate them on huge shock absorbers out of the reach of temblors or tsunamis, they shouldn’t be part of Japan’s future. Arguably, the same holds true for India, Indonesia and Turkey ― places to which Japan Inc. is trying to export its vulnerabilities. If high-technology, hyper-conservative and rules-obsessed Japan couldn’t avoid or contain Fukushima, what hope do far more graft-prone political systems have? Even the prime minister’s wife, Akie, wants her husband to stop these sales.

Abe’s party is circling the wagons to stop Hosokawa. BNP Paribas SA says investors should sell their stock if he becomes Tokyo governor. But I see this moment as an incredible opportunity for Japan. Call me crazy.

By William Pesek

William Pesek is a Bloomberg View columnist. ― Ed.

(Bloomberg)