Japanese Politics Updates – July 28, 2024

In the heat of Tokyo’s summer, our team hopes that you keep cool and hydrated.

Welcome to this week’s session of “Japanese Politics One-on-One” the 181st update on Japanese politics delivered to you by Langley Esquire and Japan Expert Insights.

Here are the events in Japanese politics that happened during the week!

• The Olympics officially began just two days ago, with the opening ceremony taking place this past Saturday on the 27^th;
• This week also saw the establishment of the LDP Presidential Election Committee… eleven Members, alongside Chairman Aizawa, have been appointed to oversee the campaign for electing the next LDP president;
• The U.S.-Japan “2+2” talks are kicking off today, with Secretary Blinken and Defense Secretary Lloyd Austin participating in these crucial discussions;
• On the economic front, the Japanese yen has strengthened remarkably from $/¥162 to $/¥152 against the dollar over the past two weeks;
• Prime Minister Kishida has been on a nationwide campaign, actively promoting Japan’s advancements. Last week, he was overseas and now he is back, focusing on domestic issues. In Hokkaido, he highlighted the development of Rapidus and announced new super-chip legislation in the upcoming Diet session; 
• US President Joe Biden dropped out of the presidential race, paving the way for Vice President Kamala Harris to be the frontrunner; 
• On Wednesday, GOJ announced the minimum wage will rise by ¥50 per hour, a 4.98% increase… the largest since 1982! This brings the minimum wage to ¥1,054 or ~$6.85 per hour. 
• While the Japanese population continues to shrink, the number of foreign residents is on the rise. There are now 3.3 million foreigners living in Japan, an 11% increase from last year. 

So, let’s dive deeper and see what-else transpired during this dramatic week:

Two Months Left of the Prime Minister’s Term of Office as LDP President

The political landscape is primed for change. As the President of the LDP typically also serves as Prime Minister, Kishida’s political future hinges on the upcoming election.

Key Points:

• Re-election Scenario: Kishida may shake up his Cabinet, replacing potential leadership contenders with new faces to consolidate control;
• Loss Scenario: A new Prime Minister will appoint their own team, likely leading to a new Lower House election in the Fall;
• Implications: These changes will impact not only Japanese domestic politics but also geopolitical relations, especially with the United States.

Upcoming Discussions:

• September 17th noon: Dan Harada and yours-truly will discuss the electoral process, key contenders, and potential scenarios; then, after the election:
• September 24th noon: post-election analysis on results, the (new) PM and implications for Japan and in international relations.

Stay tuned for updates as we approach these pivotal dates.

Prime Minister Continues Nationwide Tour

Prime Minister Kishida continues to promote Japan’s technological advancements, recently focusing on Hokkaido’s burgeoning chip industry. 

Key Points:

• Hokkaido Development: Kishida visited Hokkaido to promote Rapidus, a domestic semiconductor manufacturer consortium to produce advanced chips and ultra-thin wafers, hugely boosting the local economy within five years;
• Kumamoto Progress: at the same time, TSMC is also building its first & second advanced chip plants in Japan (and in the USA) with substantial U.S. and Japanese subsidies, aiming to secure a stable global supply chain and diversify production amidst Taiwan’s geopolitical uncertainties;
• Legislative Support:  Kishida’s visit also highlighted Japan’s focus on legislative efforts to support and enhance the chip manufacturing sector, positioning itself as a leader in high-tech chip production;
• Government and METI Involvement: Significant investments and government support directed toward making Japan a world leader in high-tech chip production, positioning it at the forefront of global tech manufacturing;

Economic Outlook:

• Yen Strengthening: Despite stock market volatility, Japan remains an attractive investment opportunity;
• Optimism for Recovery: Strong leadership and strategic investments (much of it powered by the government) offer hope for economic recovery after two decades of stagnation.

Update: Movements in Looming LDP Leadership Race

Secretary General Toshimitsu Motegi, a key figure in Japan’s political landscape, is notably absent from the “2+2” talks happening in Tokyo today. Instead of engaging with international dignitaries and attending important events, Motegi is abroad in Thailand, Indonesia, Singapore, and the Philippines. His current focus is on enhancing his foreign policy credentials as he positions himself as a potential alternative to Prime Minister. While no formal announcements have been made, Motegi’s absence from Tokyo highlights his strategic efforts to build a strong international profile… or then again, perhaps he was sent?

Similarly, the other well-known potential candidates are carefully managing their public appearances and statements. 

Potential Candidates:

• Shigeru Ishiba: former LDP General Secretary (and 4 time PM candidate!), expected to enter the race but has not made a formal announcement. Says he will wait until after Obon (mid-August) for an announcement;
• Yoko Kamikawa: Foreign Minister involved in the “2+2” talks, aligned with Prime Minister Kishida; replaced Chief Cabinet Secretary Yoshimasa Hayashi, who is today supporting Prime Minister Kishida in the politically-active Yamaguchi Prefecture;
• Sanae Takaichi: Faces challenges due to the dissolution of Shinzo Abe’s faction and disqualification of two important previous endorsers from supporting her (named to the LDP Election Committee).

Election Dynamics:

• LDP Presidency: The new LDP President will become Prime Minister, leading to a new Cabinet and almost certainly a Lower House election in the Fall… creeping up on us quickly!

Given these dynamics, the upcoming (internal to the LDP) election is shaping up to be highly competitive and unpredictable. Candidates are navigating a volatile political environment, and even Prime Minister Kishida, if he chooses to run for re-election, faces significant challenges. His incumbent status gives him a strong advantage, but Japanese politics are these days notoriously unpredictable. The next few months will be crucial in determining the future direction of Japan’s leadership.

Update: Movement Amidst Looming CDP Leadership Race

• Current Leadership: Kenta Izumi, Leader of the Constitutional Democratic Party, has been under criticism from within his party. Detractors have questioned his leadership decisions and strategies. This criticism is partly due to perceived missteps, such as his handling of the Tokyo governor election and other key issues.
• September Convention: The party-convention this time is scheduled before the LDP’s election to boost media attention and avoid past overshadowing. The previous elections resulted in limited media coverage for the CDP, which negatively impacted their visibility and effectiveness as a serious opposition force.
• Discontent Among Party Members:
  • Yoshihiko Noda: The former Prime Minister has voiced dissatisfaction but has ruled out a return to leadership. Noda’s absence from the leadership race has created an opening for others within the party but still caused rifts;
  • Yukio Edano’s Role: Former CDP president hinted at his own leadership bid. His move could either rejuvenate or destabilize the largest opposition party.

Overall, the CDP is at a crossroads. The upcoming leadership changes and the strategic timing of their convention are critical to shaping their role in Japanese politics. The outcome of these internal dynamics will determine how well they can compete with the LDP and capitalize on the current political climate. And this is not in a vacuum: the Ishin Party is hot on their heals.

Update: Movement Amidst Ishin and Democratic Party for the People

In addition to the internal dynamics within the Constitutional Democratic Party, the broader opposition landscape is also evolving. Two other key opposition parties, Nippon Ishin no Kai, led by Nobuyuki Baba, and the Democratic Party for the People, are actively exploring strategic collaborations. 

These parties are working to coordinate their efforts, focusing on sharing resources and avoiding direct competition in contentious electoral districts. The aim is to present a united front where they can each focus on different regions. This should enhance their chances of success. This strategic approach is intended to make their collective challenge to the ruling party more effective.

Recent developments include a significant dinner meeting where these parties discussed their plans for collaboration. The discussions and strategic moves have generated a noticeable buzz in the political sphere, suggesting that significant changes might be on the horizon. The coordination efforts of these opposition parties could have a substantial impact on the political landscape. This is an important development to watch closely.

Japanese Yen Surge: Another Intervention?

Yen Fluctuations:

• Strengthening: From $/¥162 to $/¥152 over 2.5 weeks, attributed to Japanese government intervention.
• Current Rate: Closed at $/¥153.7 last Friday.

U.S. Stock Market:

• Dow Jones: Dropped 1.2%.
• NASDAQ: Fell 3.6%.
• S&P 500: Decreased 3.2%.
• Japanese Market: Nikkei 225 fell 10% from early July peak; Hitachi and SoftBank shares dropped 9% in a day(!).

Political and Global Implications:

• Influence on Kishida: Yen’s performance and market volatility will affect Kishida’s re-election prospects.
• Trump’s Comments: Recent comments from Donald Trump about the Yen being too weak and the U.S. dollar being too strong have added to the discussion. This has highlighted the broader impact of international politics and market sentiments. 

Uncertainty Looms Over UK-Japan-Italy Fighter Jet Project

Current Status:

• Project: The advanced jet fighter project involving Britain, Japan, and Italy, a key initiative aimed at developing a next-generation aircraft, has hit a snag. The project’s progress has been complicated by recent political and economic changes.

UK Impact:

• New Prime Minister: Keir Starmer’s upcoming defense policy paper (September / October) almost certain to affect funding.
• Economic Concerns: Uncertainty over the UK’s financial support for the project.

Japan and Italy’s Impact:

• Japan and Italy: Japan and Italy, both crucial partners in this project, face their own economic pressures, which complicate their financial commitments. Japanese and Italian governments, like their British counterparts, are evaluating their contributions amidst broader economic difficulties.

Timeline and Goals:

• Operational Date: First jets expected around 2035.
• Objective: Produce advanced technology with significant global military implications.

China’s Aggressive Strategy in South China Sea Escalates Tensions with the Philippines

China’s recent actions in the South China Sea signal a strategic shift, particularly regarding its disputes with the Philippines.

A few weeks ago, the Chinese Coast Guard attacked a Philippine supply vessel near the Second Thomas Shoal, leading to injuries among Filipino personnel. Despite the aggression, China and the Philippines have tentatively agreed (just this week!) on resupplying the Philippine freighter to prevent further escalation.

The Spratly Islands, where the Second Thomas Shoal is located, are hotly contested by China, the Philippines, Vietnam and Japan. China has also stepped up its enforcement of fishing rights. It has imposed bans in areas it “controls” and inspected boats, including those from Taiwan. It has also captured vessels that breach these restrictions.

These moves highlight China’s more assertive approach in the South China Sea, which involves both military and administrative tactics. The situation remains fluid, with ongoing discussions about the return of detained fishermen and broader regional implications. Stay tuned as we follow the developments in our upcoming updates.

China and Russia Conduct Joint Bomber Exercise Near US Territory

The recent joint exercise by Chinese and Russian bombers near Alaska and Canada has raised geopolitical tensions. For the first time advanced bombers, including China’s newly developed H-6, conducted drills near North American airspace. The drills prompted the U.S. and Canadian jets to scramble for interception and monitoring. This heightened alert noted the deployment of these new bombers, closely observed and photographed.

This exercise highlights an escalation in military activities by China and Russia, especially in light of potential shifts in U.S. foreign policy due to Vice President Kamala Harris possibly stepping into a more prominent role amidst President Joe Biden’s diminished capacity. Such geopolitical maneuvers often occur during periods of political instability, when major powers like China and Russia testing boundaries where they perceive weakness.

Audience Comments & Questions Addressed Exclusively in our Video Briefing

• You mentioned several candidates for LDP president, but why do we keep seeing the same familiar faces?
• Observers suggest that aside from Prime Minister Kishida, the other potential candidates aren’t strong. What does this imply about the chances of those who are also expected to run?
• Do you think opposition parties will ever truly collaborate? We’ve heard for ages that they need to unite to gain power, but we haven’t seen any real results yet.
• What does the new faction-less LDP look like?
• Shigeru Ishiba’s study session only attracted 12 participants, but LDP presidential candidates need 20 supporters. Does this indicate he might not gain enough support? Is participation in the study group a good predictor of LDP support?
• Kishida recently visited the Rapidus chip plant and his administration has pledged funding to support them. Do you think Rapidus will be able to produce 2nm chips by 2027? What are your thoughts on this funding guarantee?
• Now that President Biden has stepped down, how do you see the coming election affecting Japan?
• With the recent incident involving Trump, do you think his next term is a certainty?