A staff member distributes leaflets with a photo of Japanese Prime Minister Shigeru Ishiba before delivering a campaign speech in Tokyo on October 26, 2024.
Yuichi Yamazaki | AFP | Getty Images
With the ruling Liberal Democratic Party failing to secure a majority in the Oct. 27 lower house election, the Japanese government will be in a weak position to address the challenges facing the country.
Voters passed ‘harsh judgment’ on LDP, In the words of Prime Minister Shigeru Ishiba.
After the election results are in, the parties have 30 days to try to form a coalition government and elect a prime minister. It’s unclear what the exact makeup of a coalition government will look like, casting a shadow over economic policy and Ishiba’s fate.
William Pesek, author of “Japanification: What the World Can Learn from Japan’s Lost Decade,” told CNBC’s “Squawk Box Asia” that Ishiba and the LDP may still manage to form some form of coalition government.
“But it’s going to be a very weak administration, and there are a lot of challenges ahead, at least possibly a Trump 2.0 presidency,” he said.
Damian Thong, head of Japan equity research at Macquarie Capital, wrote in a note, “We will be watching to see if Ishiba can solidify his position and build a stable alliance to support Coherent policy.
Thong expects the overall policy status quo to persist even under a coalition government, noting that common policies will be easier to enact, such as renewable energy investment, regional investment and further social spending and tax cuts.
Tong predicted no major changes in the country’s defense policy, but noted that “significant growth in (defence) exports may be challenging.”
In late 2023, Japan, under the leadership of then-Prime Minister Fumio Kishida, instituted a revise its guidelines Selling defense equipment overseas allows the country to export finished products to licensed countries.
Masahiko Loo, senior fixed income strategist at State Street Global Advisors, said the firm expects a larger, more populist fiscal package regardless of the outcome of the coalition government.
Is Shiba going out?
Ishiba’s own fate is now in question. Although he won the LDP leadership race on September 27, the long-ruling party lost its majority in the lower house after he called for early elections.
Pesek believes Ishiba’s days are “numbered.” The author said, “We have seen in the past 30 days the chaos of his government policy, and he has taken a very big gamble by calling an early election, which has dealt him a huge blow. You can say that he does not deserve to be in office after 30 days.” Prime Minister.
He added that the party “definitely” had to force Ishiba out, noting that the embattled politician was “stubborn at this point.” indicated his intention to remain Prime Minister.
“But at some point, the party elders might find some way to provide him with political cover to step aside gracefully in some way. You might see another intra-party election where they elect a new person. , new prime minister.
James Brady, vice president of consulting firm Teneo, also pointed out that “the election results may mean that Shigeru Ishiba’s term as prime minister will be short.”
Brady did, however, predict a longer timetable for the embattled politician, saying the Liberal Democrats were tired of September’s lengthy leadership battle and election results.
Therefore, he believes Ishiba may lead the party in the coming months to finalize the budget for the 2025 fiscal year starting in April 2025.
However, even if Ishiba is ousted, the party leader will have no clear leader. Analysts mentioned names such as former Economic and Security Minister Takaichi Sanae, Chief Cabinet Secretary Yoshimasa Hayashi and Finance Minister Katsunobu Kato.
As a result, State Street’s Lu said there is an increased risk that the Prime Minister’s Office will fall back into a “revolving door” situation. He pointed out that before Shinzo Abe took office in 2013, the average term of the country’s prime minister was only 382 days.
Since Eisaku Sato in 1972, Japanese prime ministers have rarely stayed in office for more than three years, except for Junichiro Koizumi who served from 2001 to 2006 and the late Shinzo Abe.
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