Japanese Politics Updates – January 19, 2025

Hello and welcome to the 206th episode of Japanese Politics One-on-One; here are the latest developments in Japanese politics:

• Week ended at $/¥156.28;
• Trump presidency starts Monday, change is anticipated;
• Revelations of kickback scandal are implicating Tokyo Metropolitan Government as well, maybe even further afield;
• Ethics Committee questions 14 Upper House members starting tomorrow;
• Primaries among opposition parties seem to be taking shape, paving the way for a strategic unification among opposition candidates vying for LDP voters;
• According to JiJi Press: Ishiba Cabinet’s approval rating inched up to 28.2% for January. It is still in the sub-30 danger zone. Disapproval drops one point to 40.3%.

Key Challenges as the Diet Opens: Budget Negotiations, Scandals, and Diplomacy

The Japanese Diet is set to open this coming week, on Friday the 24th. This will mark the start of an eventful political season. The Emperor will come from the palace across the moat to officially inaugurate the session, with attendees in their finest attire. Although no new members will join this time, the ceremonial opening will set the stage for the real political work, which begins in earnest on Monday after a weekend recess.

There are three key challenges ahead:

Passing the 2026 Budget

The immediate priority is passing the 2026 budget, a constitutional requirement that must be completed by March 31. While this outcome is nearly certain, the process will be contentious. The Prime Minister lacks 11 votes to secure the majority needed and must form a coalition with opposition members. His most likely partners are Ishin-no-Kai or the Democratic Party for the People (DPP), as the smaller parties lack even 11 members, enough to close the gap.

Negotiations with Ishin-no-Kai and the DPFP are expected to be tense. The Constitutional Democratic Party, however, is adamantly opposed. The party is using the ongoing LDP slush fund scandal to demand public and sworn testimony from those involved. Without meeting these demands, the party has made it clear they will not cooperate in passing the budget. This could result in severe political consequences, including the Prime Minister’s potential loss of his position.

The Prime Minister’s strategy will likely lean towards Ishin-no-Kai, given the upcoming Osaka Expo in April, just weeks after the budget deadline. Ishin-no-Kai, with 38 members, may find common ground through negotiations tied to the Expo. This is a significant event in their political stronghold. However, even if the budget passes, securing long-term cooperation to avoid subsequent clashes will be essential.

LDP Scandal Fallout

The LDP is mired in scandal following the Friday arrest(!) of 72-year-old Hidekatsu Yajima, the party’s accountant in the Tokyo Metropolitan Government. Yajima was arrested for failing to report ¥60 million (~$386,000) between 2019 and 2022. For individual members on the take, the amount each is reported to have received is below the Public Prosecutor’s threshold for harsher legal action (¥30 million per year/ individual). However, the scandal has exposed deeper issues of graft and financial misconduct within the party.

The scheme involves LDP members receiving kickbacks for selling surplus “study session” tickets, a practice pervasive at both the local and national levels, it is turning out. Although the Prosecutors capped their calculations at three years, it is believed that such practices have persisted for 15~20 years. The public, however, is less forgiving than the legal system, and the Court of Public Opinion may deliver harsher judgments. The opposition is seizing on this opportunity, with the DPFP and other parties looking to repeat their previous successes in the upcoming elections. That seems unavoidable at this point.

This scandal, particularly in Tokyo, is expected to impact the LDP’s performance in June’s local elections and beyond. Opposition parties are emboldened, seeing the LDP’s vulnerabilities as an opportunity to increase their share of seats.

Strengthening U.S.-Japan Relations

Finally, the Prime Minister must navigate Japan’s relationship with the incoming U.S. administration. While the foreign minister, Mr. Iwaya, has been invited to the inauguration, the Prime Minister himself will not attend. Japan’s decision to send its foreign minister is a rare move for such an event. It signals an effort to maintain strong diplomatic ties. Building a working relationship with the incoming administration will be critical for Japan’s geopolitical strategy. This will be even more so given its reliance on the U.S. for regional security.

Broader Implications

The Prime Minister’s ability to handle these challenges will determine his political survival. It will also impact the LDP’s prospects in the upcoming Upper House election. Successfully passing the budget, securing a reliable coalition, and addressing the scandal fallout will set the tone for his tenure. However, failure in any of these areas risks political instability, public backlash, and potential shifts in Japan’s political landscape. The coming weeks will be critical as these issues unfold.

Bank of Japan Prepares Key Economic Decisions Amid Inflation and Global Uncertainty

The Bank of Japan (BoJ) will hold its monthly two-day meeting on Thursday and Friday, coinciding with the opening of the Diet. Governor Kazuo Ueda is expected to address key economic challenges, including a potential interest rate hike. This move is being considered due to rising living costs outpacing salary growth, despite signs of gradual economic recovery and a strengthening yen.

The BoJ faces a delicate balancing act between maintaining inflation near its 2% target—unmet for 30 months—and avoiding further economic burdens. Upcoming events like the annual spring wage offensive in April and May, where labor unions negotiate wage increases, may offer some relief. However, these could be overshadowed by persistent inflation and reduced consumer spending.

Consumer spending, which accounts for over 50% of Japan’s GDP, remains a significant concern. Declines in spending directly affect GDP and influence the yen-dollar exchange rate, which heavily impacts economic stability. The BoJ’s announcements, especially with global uncertainty tied to the incoming U.S. administration’s policies, are being closely watched for their implications on both domestic and international markets.

Governor Ueda’s decisions later this week are expected to set the tone for Japan’s economic strategy moving forward.

Japan Strengthens Defense Ties with the UK, Restructures NATO Mission

Japan’s Defense Minister, Nakatani Gen, visited the UK last week to discuss the collaboration between Japan, the UK, and Italy on an advanced sixth-generation fighter project. This joint venture aims to replace Japan’s Mitsubishi F-2 jets and the UK’s Eurofighter Typhoons by 2035. The project’s headquarters will be based in Reading, UK, with a Japanese leader overseeing it. The partnership could expand, with Saudi Arabia being a potential new participant. However, funding remains a challenge for the initiative.

Nakatani’s visit also underscored growing defense ties between Japan and the UK, as over 100 British troops from the 16th Air Assault Brigade arrived in Japan for joint exercises. These exercises, dubbed Vigilant Isles, mark the first training of British troops on Japanese soil, working with Japan’s Self-Defense Forces, including their airborne divisions. This cooperation is part of a broader four-year training plan that also involves Australia and the US.

Additionally, Japan’s embassy in Brussels has seen a shift in its role with NATO. Japan’s Ambassador to NATO is now a separate post. A new ambassador, Osamu Izawa, was assigned to handle Japan’s growing defense and intelligence ties in Europe. This restructuring indicates Japan’s ambitions to strengthen its security and intelligence relationships, particularly in its pursuit of closer cooperation with the Five Eyes intelligence alliance. The decision to establish a new office for NATO operations reflects Japan’s desire to improve its security infrastructure and better align with global defense standards.

Tokyo Governor Allocates 100 Million Yen to Boost Overseas Study for Students

Tokyo Governor Yuriko Koike has allocated 100 million yen for a program to encourage Japanese students in Tokyo to study abroad. Starting in 2026, Tokyo’s Metropolitan Government will offer financial assistance to students who wish to participate in either short-term or long-term study programs overseas. This initiative is aimed at raising international awareness. It will not extend to foreign nationals residing in Tokyo, even the children of those married to Japanese citizens. The program will select 500 students for short-term stays (4 weeks to 3 months) and 100 students for longer-term assignments (6 months to a year). It will provide up to 3.15 million yen per year, plus a monthly stipend of 150,000 yen for long-term participants. Not bad!

This funding initiative highlights the Tokyo government’s efforts to address Japan’s ongoing deficit in sending students abroad. While the number of foreign students coming to Japan has increased, Japanese student participation in overseas education has declined. The program is also part of broader efforts to improve Japan’s global engagement. It will provide additional support for research and educational institutions like Tohoku University, which recently received substantial funding for its research initiatives.

Shinji Ishimaru Launches New Political Party Saisei-no-Michi to Contest Tokyo Seats

A new political party is emerging in Japan. It is led by Shinji Ishimaru, who previously came in second place in the 2024 Tokyo gubernatorial election. Ishimaru, a former mayor from Hiroshima, has announced the formation of a new party called Saisei-no-Michi(Path to Rebirth). The party aims to contest Tokyo Metropolitan Government seats. The party will focus on securing a portion of the 127 seats in the Tokyo Metropolitan Assembly. It will try to leverage discontent with the ruling Liberal Democratic Party (LDP), particularly amid allegations involving slush funds.

Ishimaru gained visibility through effective use of social media during his gubernatorial campaign. He plans to focus on local Tokyo politics first. He has outlined plans to contest Tokyo’s 42 constituencies. This development signals a shift in the political landscape. There is potential for opposition parties to capitalize on voter dissatisfaction with the LDP, particularly regarding allegations of financial misconduct. Ishimaru’s future strategy may also involve targeting seats in the national Upper House election, though that timing is incredibly tight.

Record 37 Million International Visitors in 2024, Tourism Spending Soars

In 2024, Japan experienced a record-breaking 37 million international visitors, marking a 15.6% increase compared to pre-pandemic 2019. The surge in tourism was driven by factors such as a weakened Yen, “revenge tourism,” and improved direct flights, particularly from China. The number of Chinese tourists saw a significant rise. However, it still remains 27% below 2019 levels, indicating potential for further growth. December alone saw 3.5 million total visitors, setting a new monthly record.

Tourism contributed a substantial 8.1 trillion yen (approximately $51 billion) to the Japanese economy in 2024. The is a 53.1% increase over 2023, and nearly 70% higher than 2019 levels. The highest spenders were Chinese tourists, who accounted for 21% of total tourism spending. The US and Taiwan followed in spending, with the UK leading per-person expenditures. The influx of international tourists continues to grow. Japanese outbound travel reached 13 million, still up 35% from 2023 but down 35% from 2019 levels. The increasing number of foreign tourists is placing pressure on domestic destinations. This is particularly the case in Kyoto, where local pricing and availability are affected by rising demand.

Questions from the Audience Answered Exclusively during the Briefing

• How much heed should be taken of Ishiba’s threats to dissolve the Lower House, and trigger a double election, after the budget approval? 
• To what extent is Ishiba able to overrule other members of the LDP’s aging leadership, i.e., the coalition of big-wigs who elected him?
• How much of recent developments is a reflection of the LDP infighting between the previously dominant Abe faction and others such as Kishida’s Kochikai faction?
• Is it not more likely that the LDP will compel Ishiba to retire and instead bring in Mr. Hayashi or Mr. Kishida to continue the rest of the term?
• Would a July 2025 double-election be favourable to the opposition?