Japanese Politics Updates – September 21, 2025

Broadcast: Sunday, September 21, 2025  

Location: Port of Misaki, Yokohama Peninsula  

Good morning and welcome to Episode 241, five years strong thanks to your engagement. Japan faces a high-stakes moment: a weakening yen pressures exporters, Prime Minister Ishiba Shigeru sprints diplomatically before his mid-October exit, the LDP’s presidential race locks in with five candidates, economic data shows mixed signals, and unrestricted defense exports signal a geopolitical shift amid global tensions. Today, we cover the yen, Nikkei, tariffs, LDP race, trade, defense, and world flashpoints, plus a lively Q&A.  

Markets & Yen: Weakness Bites  

The yen closed Friday at 147.51 to the dollar, down 0.2% week-on-week, near 2025’s average of 148, its weakest in over two years. Structural pressures – BOJ’s 0.5% rate hold (17-year high), U.S. rate differentials – drive volatility. Exporters like Toyota and Sony gain 5-7% on overseas sales, offsetting U.S. tariffs. But households and importers face 15% higher energy/food costs, eroding wages and fueling election-year friction. BOJ’s Ueda holds off hikes until post-LDP vote (October 4); watch October’s CPI on the 16th. The Fed’s September 5 jobs report signals a rate cut, pressuring the yen further. Nikkei dropped 2.5% Friday after BOJ’s vote to unwind ¥80 trillion ($537 billion) ETF holdings, selling ¥335 billion yearly, a “century-long taper” risking sell-offs. Expect ¥/$147-150 until October 4; a dovish LDP winner could hit 152-155. Tariffs and Fed moves are wild cards. Show yen/Nikkei chart.  

Diplomatically: Ishiba’s Farewell Sprint  

Prime Minister Ishiba, resigning in a few weeks, will push Japan’s “free and open Indo-Pacific” agenda while guiding his successor’s selection. Recent and upcoming moves include: 

• • September 5: Hosted Panama’s President Mulino, inking $2 billion energy/infrastructure MOUs to counter China’s Belt and Road.  

• • September 19: Dined with Bahrain’s Crown Prince Salman, securing 10-year LNG deals hedging 20% of Japan’s energy imports.  

• • September 23-25: UN General Assembly in New York, keynoting the Summit of the Future on AI governance and climate tech, with U.S., EU, ASEAN side meetings on tariffs and $210 billion green funding needs.  

• • October: No further travel; focuses on handover post-October 4 LDP vote.  

Cabinet steps up: Foreign Minister Iwaya signed U.S.-Japan Strategic Dialogue (September 9, cyber/supply chains), co-chaired Japan-GCC talks ($15 billion ventures). Defense Minister Nakatani joined Bahrain for arms-tech deals; Economy Minister Akazawa prepped Panama on EV battery chains. Japan’s “quiet power” holds amid LDP turmoil. Pause: How’s Japan balancing global ties?  

LDP Leadership Race: Five Contenders, Koizumi Leads  

Ishiba’s September 7 resignation citing July’s upper house loss, ignites the LDP presidential race, vote set for October 4. Five candidates declared by September 22: Sanae Takaichi (hawkish, 21%), Shinjiro Koizumi (reformist, 23.8%), Toshimitsu Motegi (trade veteran, 15%), Yoshimasa Hayashi (diplomacy pro, 15%), Takayuki Kobayashi (youth appeal, trailing). Jiji Press polls show Koizumi leading, Takaichi close. Runoff likely, with 370 parliamentary and 370 rank-and-file votes in round one; round two tilts to 370 Diet votes plus 47 prefectural votes. Kingmakers Kishida and Aso sway outcomes: Koizumi meets both, Takaichi courts Aso. Televised debates start September 22, with pressers (September 23, 24), Nagoya/Osaka forums (September 26, October 2), and policy debate (September 30). LDP’s minority needs Ishin or DPP coalition and this is a postwar first.  

Economy: Trade Deficit Narrows, Tariffs Loom  

August’s trade deficit shrank to ¥242.5 billion ($1.66 billion), half July’s ¥711 billion, beating the ¥514 billion forecast. Exports dipped 0.1% (autos resilient); imports fell 5% (due to an energy glut). Cumulative 2025 deficit: ¥4 trillion, showing import reliance. U.S.-Japan deal (September 5) caps auto tariffs at 15%, but opens agriculture markets. BOJ’s ETF unwind (¥80 trillion, $537 billion) sparks Nikkei volatility (down 2.5% Friday). Core CPI eased to 2.7% in August, perpetually above BOJ’s 2% target, driven by food and energy; wages stall at 1.5%. Growth forecasts cut to 1.2% this fiscal year. Tariffs and Poland’s Belarus border closure (September 19) disrupt China-Europe rail, hiking costs 20-30%. Tensions build rapidly. 

Defense & Geopolitics: Arms Exports Surge  

Japan’s 2022 policy shift allows unrestricted defense exports: $1 billion in drones to Australia, $800 million in missiles to Philippines. Defense Ministry urges ¥50 trillion ($335 billion) over five years, boosting GDP 0.3%. Japan-South Korea meet (September 8) cements trilateral ties against North Korea’s Hwasong-20 ICBM reveal, prepping for a Rubio-led three-way conclave. China’s Senkaku incursions, Yarlung Tsangpo dam ($1.2 trillion), and Venezuela support escalate tensions. Poland’s border closure freezes €25 billion China-Europe rail, snarling Japan’s parts flows. 

Q&A Preview 

Maya fielded these questions—watch the replay on LinkedIn/YouTube/Clubhouse for insights: 

• • Is Hayashi running a stealth campaign to emerge as a consensus LDP candidate?  

• • Could deep LDP divisions lead to a party split within two years?  

• • What happens if an Ishin-LDP coalition forms, and why the Brylcreem reference?  

• • Is Japan managing the yen-dollar exchange rate to stabilize it?  

• • Why are LDP candidates focused on family issues over urgent economic concerns?  

• • Why aren’t more women running in the LDP presidential race?  

Tune in for the full dialogue above!  

In Conclusion

Japan is at a crossroads: yen pressures, LDP flux, and global tensions demand heightened focus. Your engagement, JapanHands, fuels this weekly briefing. Please Comment, Like and Share with colleagues, friends, anyone curious about Japan’s pulse – it’s our gift to you. See you next Sunday!