Japanese Politics Updates – December 21, 2025

Weekly Briefing Synopsis

Good morning, and welcome to the recap of Japanese Politics One-on-One, Episode 254 — broadcast from the cabin of the Good Ship Gryms, berthed in Katsuyama, as we close out one of the most consequential political weeks of the year and look ahead to a volatile January.

With the Extraordinary Diet now concluded, Japan enters a short but decisive interlude. The supplementary budget has passed, interest rates have moved, coalition arithmetic has shifted yet again, and the Prime Minister has quietly constructed new political redundancy ahead of what may become a defining year for her administration.

Below is what mattered and why it did:

This Week’s Headline Takeaways

• The Extraordinary Diet closed with the supplementary budget passed, but key reform promises are left unresolved;
• The LDP–Ishin arrangement has slipped back to a de facto minority position after the death of an LDP Diet member;
• DPFP leader Yuichiro Tamaki has emerged as a pivotal swing player and is being rewarded accordingly;
• The Bank of Japan raised rates to 0.75%, its largest move in decades …  yet the yen weakened further;
• Japan hosted the Central Asia + Japan Dialogue, an under-reported but geopolitically significant summit;
• Tokyo is accelerating its shift toward offensive defense capabilities under growing U.S. pressure;
• January’s Diet opening date may be the clearest signal yet of snap-election intentions.

A Coalition of Convenience, Not Alignment

The closing days of the Diet laid bare how fragmented power has become inside Nagatachō.

The LDP and Ishin no Kai entered the session with a razor-thin working majority — just one seat over 50%. That advantage evaporated with the passing of an LDP member, returning the government to a 50/50 split that functionally mirrors minority status. In that environment, promises become harder to keep and leverage shifts quickly.

Ishin’s core demands — a 10% reduction in Lower House seats and reforms to political fundraising practices — stalled in committee. While the Prime Minister argued procedural limits, Ishin viewed the outcome as a breach of political commitment. The result was a familiar Japanese outcome: the fight deferred, not resolved, with promises pushed into the January Regular Diet: kick the ball down the field.

What changed everything was the quiet rise of the DPFP.

Tamaki’s Moment and the Re-Sorting of Power

As Ishin’s leverage weakened, DPFP leader Yuichiro Tamaki stepped back into the vacuum. His party’s long-standing proposal to raise the tax-free income threshold was approved (Thursday, AFTER the Diet ended!), delivering him a visible policy win and extensive media exposure.

This move was not accidental.

By accommodating the DPFP, the Prime Minister effectively built a political insurance policy — reducing reliance on Ishin while preserving optionality ahead of 2026. DPFP now sits squarely between the LDP and Ishin ideologically, with national reach and increasing relevance.

Komeito’s decision to support the supplementary budget, despite having exited the coalition, further showed how fluid alliance behavior has become. Parties are no longer choosing sides; they are preserving leverage.

The Supplementary Budget and the Yen Problem

The supplementary budget — the largest in roughly two decades outside post-crisis periods — passed on Monday. It will inject near-term stimulus into the economy, but it also deepened market unease about Japan’s fiscal trajectory.

That unease was reflected immediately in currency markets.

Despite the Bank of Japan’s decision to raise interest rates to 0.75%, the yen weakened further, closing the week ¥/$157+. The move had been widely anticipated, and without clear forward guidance, markets treated it as insufficient to offset structural concerns: debt overhang, policy ambiguity, and external pressure.

The government now faces a narrowing set of choices. Currency intervention remains an option — but one likely deferred until the new year. Some are saying “thank god it is the end of the year!”.

Defense, the United States, and Strategic Drift

Under U.S. pressure, Tokyo has committed to accelerating its five-year defense buildup into four years, expanding domestic production of offensive systems, and loosening long-standing constraints on arms exports. These shifts represent a profound departure from post-war norms, even as constitutional revision remains politically sensitive.

A trial balloon floated last week that Japan should consider nuclear weapons was quickly walked back, but the appearance alone was notable. It reflected growing anxiety over Taiwan, North Korea, and the durability of U.S. guarantees.

Japan is no longer assuming crises will remain theoretical. This is forward planning, though a trial baloon notwithstanding.

Central Asia, China, and Quiet Diplomacy

Largely overlooked amid domestic drama, Japan hosted leaders from Central Asia in a summit years in the making. The meeting formed part of Tokyo’s broader effort to counterbalance China’s Belt and Road Initiative and reinforce its role as a regional development partner.

These states which are historically tied to Russia and increasingly pulled toward China, are hedging, not choosing sides. Japan understands this dynamic well. Its approach relies on development finance, infrastructure, and long-term engagement rather than military presence.

In a world where the U.S. is asking allies to shoulder more responsibility, this form of diplomacy matters.

Looking Ahead: January Signals and Election Math

If the Regular Diet opens unusually early — as early as January 7 — it may signal preparations for a snap Lower House election. Polling suggests the LDP could improve its position under the current Prime Minister, potentially reducing reliance on (all) coalition partners altogether.

But calling an election requires a narrative the public will accept. The coming days will determine whether fiscal instability, coalition dysfunction, or external security threats provide that justification. Keep your ears to the ground these next two weeks.

Q&A

• What is the strategic purpose of the Central Asia + Japan Dialogue, and why does it matter now?
• Does the DPFP tax-threshold deal signal the Prime Minister is building a formal backup coalition?
• Was Ishin’s leader/Governor of Osaka naïve to believe Diet members would vote to cut their own seats, by beating his chest so publically when he first got this ‘commitment’?
• If the yen weakens further, when does currency intervention become unavoidable?
• Could rising public debt force Japan to sell national assets, and to whom?
• How credible is the idea of Japan acquiring nuclear weapons, even as a long-term option?
• Will tensions involving North Korea influence Japan’s budgeting decisions?
• Is Japan doing enough to explain its strategic choices to international audiences?

Final Thoughts

The Prime Minister closed the Diet having passed her budget, absorbed a coalition setback, and quietly expanded her options. The value of the yen told markets another shoe is likely to fall soon. And beneath it all, Japan continued its steady shift toward a more assertive security posture, even as it struggles to explain that transformation clearly to the outside world.

January will come quickly and when it does, Japanese politics is unlikely to ease off the throttle. One more episode to wrap-up the year, and enter the Year of the Horse. Thank you for tuning-in and Merry Christmas!