Japanese Politics Updates – March 9, 2025

Welcome, Japan Hands!
Another week, another wild ride in Japan’s ever-shifting political, economic, and diplomatic landscape. If you’re catching this as a recap, great. But if you can, tune-in live on Sunday mornings (Tokyo) for the full experience—especially the Q&A, where things really come alive. Broadcasting once again from the deck of Gryms, anchored in Tokyo Bay, let’s dive into the week’s biggest stories:

• The Yen closed at $/¥148.02, strengthening from recent weeks, reflecting shiftingU.S. economic and trade concerns.
• Mongolian Foreign Minister’s State Visit to Japan, the first in 13 years, signals deepening bilateral relations.
• UK-Japan Trade Agreement worth $334 billion annually signals a new era of
• economic partnership, signed-off this week in the very first for Tokyo to sponsor these two countries 2+2. That is significant money for 1 year.
• Donald Trump comments on Japan’s currency manipulation and defense spending, reigniting debates on U.S.-Japan security commitments (and sending shivers throughout Kasumigaseki).
• Japan’s national budget debate concluded with historic revisions, the first in 29 years, reducing government spending for the first time in 70 years. Are you too seeing the pattern emerging here?
• Upcoming Upper House election and potential double election shaping Japan’s political landscape.
• Osaka Expo 2025 ticket sales struggle, with Ishin-no-Kai seeking LDP support for event success and likely added some secret-sauce to reaching the Budget agreement.

Markets and Currency: Yen Shows Unexpected Strength

Just when everyone had written off the yen’s slow bleed, we saw it close at $/¥148.02 this past Friday. That’s a meaningful strengthening, considering we had been in the ¥151-160 range for months. What’s behind this? Well, a mix of factors. First, trade volatility in Washington —Trump’s rethinking trade deals with China, Korea, and Mexico, which has made markets nervous. But also, Japan’s internal economic policies are shifting, and businesses are bracing for what comes next. Expect further fluctuations, but this is a temperature-check worth watching.

Diplomatic Moves: Mongolia and the UK

If you noticed Mongolian flags all over Tokyo this week, it wasn’t a coincidence. Japan welcomed Mongolia’s Foreign Minister for the first state visit in 13 years. While Mongolia isn’t the first country that comes to mind in global diplomacy, its strategic location between Russia and China makes it a key player in regional stability.

Meanwhile, Japan and the UK just inked a $334 billion trade agreement—a stunning boost for both economies. This comes as part of a Tokyo-hosted 2+2 summit, a first for the two nations in this format. And let’s not forget that Japan, the UK, and Italy are also co-developing a next-generation fighter jet—so this isn’t just about trade; it’s also a military partnership in the making.

Trump’s Japan Problem: Currency Manipulation and Defense

Well, it was bound to happen. Donald Trump has turned his attention to Japan. He’s calling out Tokyo on two fronts:

1. Currency manipulation—implying Japan is artificially keeping the yen weak to boost exports. This isn’t a new accusation, but in this current environment, expect it to be a recurring talking point. Trade Minister Yoji Muto will be dispatched quickly to attempt to address these including reciprocal and steel & aluminum tariff issues.
2. Defense spending—Washington wants Japan to spend 3% of its GDP on defense, rather than the 2% it committed to under Kishida’s plan. Ishiba, Japan’s Prime Minister, isn’t budging yet, but these conversations are just beginning. The Senate confirmation of President Trump’s pick of US Ambassador begins this week, so Japan will be hot in the news.

The Budget Battle: A Historic Shake-Up

If you’ve followed my briefings, you know the budget was the dominant topic for months. Finally, on March 4, it passed the Lower House—but not without drama:

• This is the first budget revision in 29 years, showing just how much the balance of power has shifted.
• It’s also the first time in 70 years that government spending has been reduced. That’s right—an actual cut.
• The LDP needed 13 extra votes, and they got all 38 from Ishin-no-Kai, their newest best friend… for now.
• Who voted against it? The Democratic Party for the People (DPFP) and the Constitutional Democratic Party (CDP)—a sign that tensions are far from over.

In fact, this budget fight is not quite over. Amendments are now required due to last minute flip-flopping and the real battle is just beginning… so while the issue has moved out of the Lower House, these amendments will have to come back after the Upper House accommodates them. This means the 50 Members of the Lower House Budget Committee do NOT get to take a break (as they have after passing the Budget upstairs for the last ~30 years), but now have to stay in-committee and cross-reference what is going on in the Upper House Budget Committee.  A very unusual and uncomfortable situation for everyone involved. Elections are coming, and the opposition smells blood. The LDP may have survived this round, but the fractures in their coalition are growing.

Election Watch: The Looming Double Showdown

• The Upper House election is set for June/July. No surprises there—this is a normal cycle.
• But a Lower House election might be coming too, a rare and dramatic move. This would be a high-stakes gamble for Ishiba’s government.
• The LDP-Komeito alliance is shaky. Komeito has been rethinking its coalition with the LDP, and if they split, the LDP will be even weaker. And as a result, Ishin-no-kai becomes a bit more attractive as a possible replacement to Komei-to. 
• The Abe Faction scandal isn’t going away. The Accountant’s testimony, though behind closed doors, further reinforced how deep the corruption ran. This will absolutely impact voter sentiment.

Osaka Expo 2025: A Political Lifeline for Ishin-no-Kai?

• Ticket sales are underwhelming, and Governor Yoshimura is scrambling for ways to generate buzz. Please don’t forget that he is also the new leader of Ishin-no-kai.
• Ishin-no-Kai is counting on the Expo as a key campaign asset—if it flops, it could hurt them in the elections.
• Trump might visit, but that’s still uncertain. More likely? Vice President Vance representing the U.S. at the event, which would still be a major diplomatic win. This presents a dramatic twist for bilateral diplomacy and for political horse-trading internally. What a delicious mix! Something to watch closely.

Questions from the Audience Answered Exclusively During the Briefing

1. How will Trump’s policies affect U.S.-Japan security relations, especially regarding Taiwan?
2. What percentage of Japan’s 2025 budget is allocated to Social Security, and is it sustainable?
3. What’s the latest on Administrative Reform—is Japan making progress in reducing bureaucracy?
4. With Osaka Expo struggling in ticket sales, will additional government support be provided?
5. What triggers a Lower House election alongside the Upper House? How realistic is a double election?
6. Why has the LDP struggled to form a stable coalition despite decades of dominance?
7. Is Japan considering a more independent defense strategy, given Trump’s pressure?
8. Will Vice President Vance visit the Osaka Expo in place of Trump?

Final Thoughts: Japan at a Crossroads

The budget battle is settled, but the deeper political fight is just beginning. The LDP has survived, but just barely… PM Ishiba even less so. Meanwhile, Trump’s return to power is reshaping Japan’s strategic calculationsin real time. Economic policy, elections, foreign relations—it’s all in flux. If you thought 2024 was dramatic, 2025 is shaping up to be even more consequential.

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