Japanese Politics Updates – September 1, 2025

Good morning, friends, and thank you for joining Episode #239 of Japanese Politics One-on-One. Broadcast from the deck of the Good Ship Gryms off the Chiba coast, this week’s briefing unfolded against the backdrop of typhoon rains, a tense political environment, and fast-moving diplomatic developments. Here’s what we covered:

• The volatile dollar/yen exchange rate and what lies ahead.

• Prime Minister Ishiba’s whirlwind diplomatic agenda and outcomes.

• The domestic political earthquake: leadership votes and Ishiba’s fate.

• Economic challenges – trade, inflation, $550 billion gift? and BOJ policy.

• Regional security flashpoints – North Korea, Taiwan, and Japan’s defense posture, sprinkled in-between Venezuela, Iran, Ukraine, Yemen.

The Dollar/Yen Exchange Rate

As of Friday’s close, the dollar/yen stood at ¥146.82. Volatility remains the defining feature, driven by U.S. yields, tariff uncertainty, and BOJ-Fed divergence. The upcoming Bank of Japan meeting on September 20th will be pivotal, as markets speculate whether Governor Ueda may signal further tightening to counter inflation. For now, a ¥145–150 range seems likely, but sudden interventions remain on the table. In fact, some are inevitable.

Prime Minister’s Diplomatic Agenda

Prime Minister Ishiba capped a whirlwind week of diplomacy. Japan hosted TICAD 9, welcoming 49 African nations and signing over 300 cooperation MOUs, emphasizing human capital and industrial development. Ishiba also hosted South Korean President Lee Jae Myung, advancing visa programs and coordination on denuclearization. Indian Prime Minister Modi visited the same week and together launch an economic security framework (before heading off to China!). Meanwhile, Foreign Minister Iwaya engaged Germany in the first strategic dialogue, and Defense Minister Nakatani prepares to visit Seoul this next week, signaling deepening trilateral defense ties. Many firsts.

Domestic Politics: Ishiba’s Fate

Tomorrow’s LDP recall vote looms large. Between 10:00 and 15:00, lawmakers and prefectural councils will either trigger or dispel a presidential election. Party heavyweight Tarō Asō has already called for Ishiba’s removal regardless of the vote, stacking the odds against him. Cabinet Ministers and junior lawmakers are signaling recall support, while former allies urge resignation. Agriculture Minister Shinjirō Koizumi is carefully positioning as a reformist successor, appealing to younger voters and reshaping the leadership landscape. A dinner with the PM last night is seen as pivotal. We will know in 24~28 hours.

Economic Challenges

Japan’s economy faces mounting pressure. Exports to the U.S. fell 10.1% year-over-year in July, with auto exports down 30%. The Trump tariffs now stand at 15% after Akazawa’s Washington trip. Accompanied by Japan’s $550 billion investment commitment they have raised questions about distribution and benefit. Inflation data due Friday will test households already squeezed despite a 0.5% real wage uptick in July. Meanwhile, the proposed ¥20,000 per-person cash handout faces revisions amid political criticism. All is up in the air until the PM issue is resolved.

Regional Security and Defense

North Korea honored commanders returning from combat in Russia, underscoring its tightening alignment with Moscow. China and Russia continue joint drills, while incursions into Taiwan’s ADIZ persist. Japan is responding by strengthening missile defenses across its southern islands and accelerating drone procurement. The Ministry of Defense has requested a record ¥8.8 trillion budget for FY2026, aiming for 2% of GDP by 2027. Naval exercises with allies, including the British carrier HMS Prince of Wales, highlight Japan’s increasingly assertive security posture.

Q&A Highlights (Questions Only)

• Given the PM needs unanimous cabinet signatures to dissolve the House—and some ministers won’t sign—does that make the dissolution threat empty? If so, will the LDP announce a presidential poll tomorrow, and is Ishiba unlikely to run again?

• With factions formally dissolved except for Aso’s, what’s the likelihood that LDP factions are re-established (even if under new names/structures)?

• Is it still important to track Ishiba’s goals as PM? What, specifically, is he trying to accomplish domestically and regionally?

• In the current power dynamic, how easy would it be for the LDP to push through their preferred choice for prime minister? 

• Who is likely to be the LDP’s coalition partner?

• The White House EO cites $550B in Japanese investment into the U.S., but the source of these funds is unclear. Do you have insights on where that money comes from and how it’s structured?

• If Ms. Takaichi becomes a contender and possibly Japan’s first woman Prime Minister, how significant would that be and what would it mean for the political balance?

• If the U.S. rebrands from Department of Defense to Department of War, what impact would that have on Japan, the Indo-Pacific, and specifically the Taiwan Strait?

• If an LDP presidential contest comes to be, how do these hopeful PM candidates present their strategies to limit Japan’s involvement in the Russia-Ukraine war and a Taiwan contingency? All will want to distinguish themselves: how is this done during the 11-day campaign period?

Final Thoughts

Episode #239 highlighted the intersection of Japan’s domestic political turbulence, a fragile economy, and a shifting security environment. With Ishiba’s leadership truly in serious jeopardy (as of this briefing, to be decided within hours), the yen under increasing pressure, and Japan stepping more visibly into global diplomacy and defense, September will be a defining month. Thank you for following each week’s developments. Stay tuned as the story unfolds. Oh, and extremely grateful for your Likes and comments. Please share the love.