Hello and welcome to the 205th episode of Japanese Politics One-on-One; here are the latest developments in Japanese politics:
- Week closes at $/¥157.69;
- Preparations for World Expo heating up, a big deal for Osaka based Ishin-no-kai;
- Surge in flu cases nationwide, 1838 schools closed;
- Suga in Washington DC speaking with former Ambassador Hagerty pushing for closer US-Japan military ties;
- PM Ishiba in Indonesia and Malaysia, pursuing regional cooperation;
- Diet opens on Friday 24th for 150-day session;
- US Secretary of State Antony Blinken visited Tokyo on Tuesday on his way back from South Korea. Tensions surround the US government blocking Nippon Steel’s US Steel acquisition.
Upcoming Ordinary Diet Session
The Diet will enter a pivotal 150-day session starting January 24th, with the key event being the national budget for 2026. This, under the specter of the LDP having lost its parliamentary majority for the first time in three decades. The party is sailing in unfamiliar waters: negotiating with opposition parties. This is something the LDP never had to face while under the leadership of Shinzo Abe where it operated with near-unchallenged control. Of the current LDP Lower House members, only 15 were in the Diet during the last period of coalition-building, leaving the majority inexperienced in compromise-political wrangling. Similarly, opposition parties, having spent decades in a subordinate role, are also unpracticed in leveraging power effectively.
Challenges for the Prime Minister
Prime Minister Ishiba faces three critical tasks to remain in power:
Passing the 2026 Budget: The budget must be passed by March 31, requiring extensive negotiations and compromises. Currently, the LDP-Komeito coalition is 11 votes short of a majority, even after gaining two new members this week. The Prime Minister will need to secure support from either individual legislators or an opposition party to ensure the budget’s passage.
Establishing Relations with the United States: PM Ishiba must foster a strong relationship with U.S. President-elect Donald Trump, but his position as leader of a minority government weakens his standing. Previous Japanese leaders enjoyed easier access to U.S. presidents, but Ishiba has struggled even to arrange a meeting. The earliest opportunity may come in February, during a short break in the Diet’s schedule.
Building Alliances with Opposition Parties: Ishiba must court one of three major opposition parties to secure the votes needed for legislative stability:
- The Constitutional Democratic Party of Japan (CDP), the largest opposition group, remains firmly opposed to the LDP and advocates unseating the government entirely;
- Ishin-no-kai, a regional party based in Osaka, has shown some willingness to collaborate, particularly with the six-month Osaka Expo looming in April. In exchange for supporting the LDP, they may seek financial commitments to enhance the Expo’s (and their) success;
- The Democratic Party For the People (DPFP), which tripled its Diet presence in the last election, is another potential ally. However, its leader recently stepped down from the spotlight due to a personal scandal, complicating negotiations.
Opposition Dynamics
The opposition parties are also engaging in extensive internal and inter-party discussions. While some advocate for uniting in order to challenge the LDP, others, like Ishin-no-kai, are weighing the benefits of cooperating with the ruling coalition. This creates an environment rife with political horse-trading, with Cabinet positions and legislative priorities likely are being used as bargaining chips.
Komeito’s Uncertainty
Komeito, the LDP’s long-time coalition partner, is reassessing its alliance. As the self-proclaimed “Clean Government Party,” Komeito fears its association with the LDP’s recent scandals is tarnishing its reputation (no kidding!). The party’s declining membership and electoral performance add to its concerns, raising the possibility that it could break away and join an opposition coalition.
Post-Budget Period
Once the budget is passed, likely by April 1, the political landscape will shift. The remaining weeks of the Diet session, until July 10, will focus on other legislative priorities, including preparations for the Upper House election. The LDP, already weakened by its Lower House losses, risks further setbacks in the Upper House, which could embolden the opposition and further destabilize the government.
Leadership Questions
Amid these challenges, the LDP may consider replacing Ishiba before the Upper House election. Potential successors include former Prime Minister Kishida and other prominent figures like Sanae Takaichi, who are quietly positioning themselves for leadership bids.
Broader Legislative Issues
One contentious issue likely to surface is a proposed change to Japan’s spousal name laws, allowing couples to retain separate surnames—a departure from the traditional family registry (Koseki) system. Opposition parties have championed this change for decades, but the LDP has consistently blocked it. With committee leadership now shared between parties, in particular the Judicial Affairs Committee overseeing this issue, this proposal is going to gain traction in the session.
Economic Struggles: Falling Household Spending and Inflation Challenges
Japan’s economy continues to face challenges, with household spending declining for the fourth consecutive month in November 2024, down 0.4% year-on-year. Despite wage increases, inflation has eroded purchasing power, leaving consumers worse off. The Bank of Japan (BOJ) has missed its 2% inflation target for 30 months and is unlikely to take bold action in its January 24 policy meeting, coinciding with the opening of the Diet.
Meanwhile, the yen has weakened, approaching the critical ¥160 per U.S. dollar level, prompting fears of government intervention, as seen last year when the equivalent of $100 billion was spent to stabilize the currency. This depreciation complicates Japan’s plan to increase defense spending to 2% of GDP, as military imports—priced in dollars—become more expensive. The reliance on debt to finance over 25% of the 2025 budget further highlights the fragile state of the economy.
With the yen’s volatility and the BOJ’s cautious stance, Japan faces a delicate balancing act in managing domestic and international economic pressures.
Japan’s New National Security Adviser Amidst Diplomatic Shifts
Japan has appointed Masataka Okano, Vice Foreign Minister, as the new National Security Adviser, marking the fourth such appointment under the Foreign Ministry. Okano will officially assume the role on January 20, aligning with U.S. leadership changes as Jake Sullivan transitions to Mike Waltz, the incoming National Security Adviser in the Trump administration.
This shift comes amid Japan’s concerns about managing diplomatic dynamics with the new U.S. administration. Political tensions within Japan’s leadership, particularly involving figures like Shigeru Ishiba, Kono Taro, and Sanae Takaichi, also remain a focal point as discussions about a potential double-election gain momentum. This will be the same time as the Tokyo Metropolitan Government election cycle.
Chinese Cable Incident and Taiwan Tensions Heighten Regional Security Concerns
A Chinese-owned cargo ship damaged a telecommunications cable in Taiwan’s northern waters while dragging its anchor. Although such incidents occur occasionally, suspicions arise due to China’s increasingly aggressive military posturing near & around Taiwan. Similar incidents, such as two Chinese-flagged vessels damaging cables in Sweden last year, have been noted as part of a pattern.
Meanwhile, cyberattacks from China targeting Taiwan have surged, doubling from 1.2 million to 2.4 million daily. These attacks primarily affect telecommunications, defense, and transportation sectors, further heightening tensions.
In Okinawa, tensions persist between the U.S. military presence and local government, with disputes over troop relocations to Guam remaining unresolved. Concerns also grow over insufficient hangar capacity in Okinawa & elsewhere to support U.S. military operations in case of conflict involving Taiwan.
On the diplomatic front, U.S. Ambassador Rahm Emanuel has departed Japan, and George Glass, former U.S. Ambassador to Portugal, is expected to succeed him pending Senate confirmation. Glass was considered a Trump nominee for Tokyo in the previous Administration, too.
North Korea’s Hypersonic Missile Tests Escalate Regional Threats
North Korea launched two hypersonic medium-range ballistic missiles on Monday. Hypersonic missiles, capable of flying at 12 times the speed of sound, are highly accurate and virtually impossible to defend against. These missiles, with a range of approximately 932 miles, can strike all of Japan, Okinawa, and even Guam.
The timing of the launch coincided with U.S. Secretary of State Antony Blinken’s visit to Japan after his trip to South Korea, underscoring the tense regional dynamics. Blinken’s discussions focused on strengthening trilateral cooperation between South Korea, Japan, and the United States amidst these escalating threats.
Ethics Committee Investigations Threaten Political Stability
As the Diet convenes, the Ethics Committees of both the Upper and Lower Houses are focusing on investigating LDP members implicated in a long-standing slush fund scandal. For about 20 years, the LDP reportedly collected and distributed unreported funds to members based on factional influence and popularity. These funds went undeclared and untaxed. Former Prime Minister Shinzo Abe halted the practice shortly before his assassination. However, it was reinstated within weeks of his death, allegedly by members of his faction.
The current investigation aims to uncover who revived the scheme, with speculation pointing to a small group of influential individuals. The Upper House Ethics Committee is especially active, with around 20 implicated LDP members up for re-election. The chair of the Budget Committee, now from the Constitutional Democratic Party, holds the authority to summon the Prime Minister for testimony, intensifying scrutiny.
If the scandal persists in dominating public discourse, the LDP risks significant losses in the upcoming Upper House election, potentially weakening its grip on power and bolstering opposition parties. The political climate is fraught with tension, strategic maneuvering, and a growing sense of uncertainty as the Diet session unfolds.
Questions From The Audience Answered Exclusively During The Briefing
- Would you concur that Japanese politics has reached an inflection point?
- If Ishiba’s approval rating continues to drop, what can we expect to happen?
- What are your thoughts on calls for Japan to increase its defense spending to 3% of GDP?
- Do you think that the BoJ will intervene to deal with the decline in real wages?
- Is there scope for Japan to step into a new wave of technical innovation regarding energy?
Are you familiar with “Tokyo on Fire”? Episodes are available on YouTube “Langley Esquire”: excruciatingly-gained insights sifted over 40 years in-country! Entertainingly presented.
“Japanese Politics One-on-One” episodes are on YouTube “Japan Expert Insights”.
If you gain insight from these briefings, consider a tailored one for your Executive Team or for passing-through-Tokyo heavyweights.
To learn more about advocacy in Japan, read our article “Understanding the Dynamics of Lobbying in Japan.”
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