Japanese Politics Updates – March 2, 2025

Hello fellow Japan Hands, and welcome to your weekly update. This of course is just a synopsis: much is lost in making the verbal briefing crisp for you. The better idea is to tune in to the live version on Sunday mornings (Tokyo). In particular, the Q&A section produces the most value. But everyone is busy, so we take the time to compile these latest developments to keep you informed. Broadcasting from the deck of the good ship Gryms, Tokyo Bay:

• The Yen closed at ¥/$150.62, slightly weaker than last week, though volatility remains controlled.
• Japan’s national budget debate nears its final stretch, with critical votes and negotiations creating political uncertainty.
• The LDP coalition is struggling, as Ishin-no-Kai steps in to secure votes following the LDP’s breakdown with the Constitutional Democratic Party (CDP).
• The Slushfund Scandal refuses to fade, with a key accountant’s testimony confirming deep-rooted corruption within the LDP.
• Upcoming Upper House elections and a potential double election remain key political flashpoints.

Japan’s Inflation and Economic Concerns

Japan’s inflation rate remains high, with core prices up 3.2%, marking the steepest rise in two decades. Essential goods, such as cabbage and rice, have seen a 70% year-over-year price surge, sparking concerns about stockpiling. In response, the government has begun releasing strategic food reserves to stabilize supply. Despite this, there are fears that inflationary pressures will continue to squeeze household budgets.

Japan’s Foreign Policy on Ukraine

  Japan’s Foreign Minister Iwaya reaffirmed Japan’s commitment to Ukraine, maintaining its long-standing position. However, the three-year anniversary of the Ukraine invasion has intensified diplomatic pressures. The recent G-20 meeting in Johannesburg exposed a shift in global sentiment, making it increasingly difficult for Japan to navigate shifting alliances as Washington’s policies evolve.

Budget Debate

The 2025 national budget debate is at a critical juncture. Last week, the CDP unexpectedly aligned with the LDP/Komeito coalition. However, momentum shifted as Ishin-no-Kai entered negotiations, offering their votes in exchange for policy accommodations.

• The LDP needs 13 votes for passage, and Ishin’s 38 Lower House members could provide a decisive edge.
• Opposition parties continue to maneuver, leaving room for last-minute negotiations or unexpected defections.
• The Abe Faction accountant’s testimony remains politically explosive, sparking press conferences and strategic positioning by all major players.

Lower House vs Upper House Power Struggles

 Japan’s Lower House holds significantly more power than the Upper House, particularly regarding budget approvals. With nearly three times the members, the Lower House can override Upper House rejections after 30 days, ensuring legislative dominance. This reinforces the LDP’s ruling power, though opposition forces are working aggressively to challenge this control ahead of the elections.

Opposition Party Policy Maneuvering

Opposition parties are using budget negotiations to push forward their policy goals.

• Ishin-no-Kai advocates for free education, universal school meals, and childcare support.
• The Democratic Party for the People (DPFP) demands an increase in the tax-free salary threshold, benefiting middle-class earners.
• The Constitutional Democratic Party (CDP) is focused on forcing further testimony from the accountant tied to the LDP’s financial scandal.
• The LDP is expected to side with Ishin, as their demands have a smaller fiscal impact than DPP’s costly tax reforms.

Japan’s Economic Stability Amid International Pressures  

Japan’s economic policy is being tested by geopolitical tensions and rising trade barriers.

• The U.S.-Japan trade relationship is strained, with looming tariffs on steel, aluminum, and technology exports.
• Japanese exports grew 7.2% last month, but imports surged 16.7%, driven by rising tech and machinery costs.
• New U.S. tariffs on steel and aluminum (25%) take effect in April, potentially impacting Japan’s automotive, pharmaceutical, and electronics industries.

Potential Double Election in Japan

Japan may face a double election this year, as speculation intensifies regarding a simultaneous Lower and Upper House vote.

• The Upper House election is set for July, as half its seats expire every six years.
• The LDP is seeking ways to prevent another opposition surge, as recent losses weakened its majority.
• Opposition forces are aiming to repeat their October success, which saw them chip away at LDP dominance.
• The forced testimony of the Abe Faction accountant will likely shape the election timeline and strategies.

World Expo’s Economic and Political Impact

The 2025 World Expo in Osaka, launching in two months, is set to be a major event for Japan.

• Ishin-no-Kai aims to leverage the Expo’s success to boost political influence in the Kansai region.
• There are ongoing discussions about former U.S. President Trump visiting the Expo, presenting a potential diplomatic opportunity for Prime Minister Ishiba.
• With millions of visitors expected, the Expo represents a critical economic boost for Japan’s struggling economy.

Questions from the Audience Answered Exclusively during the Briefing

• What is the latest regarding the ¥1.03 million tax barrier, and why has it taken so long to resolve?
• How might Vice President JD Vance’s role impact U.S.-Japan relations on trade and defense?
• Could King Charles play any diplomatic role in the UK’s relationship with Russia over the Ukraine conflict?
• Would expanded private high school funding increase competition for junior high school entrance exams, putting financial strain on parents?
• Why does President Zelensky consistently avoid wearing a suit, even in high-profile meetings like the Oval Office visit?