Japanese Politics Updates – November 17, 2024

The ranks of fellow-Japan-Hands are growing as people all over the world are increasingly interested in what’s going on in Japan politically, diplomatically, regionally, economically. So, if you are new to this club, welcome to the 197th of our Japanese Politics Updates!

• PM Ishiba is visiting Peru and Brazil, so the Diet is not currently in session. It will convene in 11 days for a 30 day session. 
• Week closes at $/¥154, weakened slightly throughout the week.
• Approval rating for PM up faintly, now around 43 percent (from mid-30s two weeks ago!). Let’s see what trickles-out from the foreign trips and watch the ratings.
• Ishin-no-kai leader Baba Nobuyuki has resigned; Osaka Governor is angling to take over. Leadership campaign and election December 1.
• The most important issue at this time is what is the new power-balance in Parliament, and how much sway does the LDP control?

Recent Developments in Japanese Politics

Eight weeks ago, the LDP presidential election with Mr. Ishiba barely edging-out a win in a tight race. Not a landslide, by any measure, but nevertheless Prime Minister days afterwards. However, despite his campaign promise not to call for an election right away, Ishiba turned around and did just that, calling a vote at the soonest possible date. The LDP took a real beating, and the Constitutional Democratic Party (CDP) rose as the top opposition.

The real story, though, was the Democratic Party for the People (DPP) under Mr. Tamaki. Over the last few weeks, things have been in constant flux as a result: the LDP, which once controlled more than half of the Diet seats, no longer has that majority, and now is struggling to get anything done. For the first time in decades, the LDP doesn’t control Committee seats, which means they no longer run the show the way they used to. This is all new territory for Japanese politics.

Tamaki, a rising star, has his own issues. On the day the Diet convened, tabloid magazine Flash!” exposed him in a sex-scandal, which really hurt his credibility. This, along with his refusal to join forces with the LDP for a coalition government, left him in a weakened position. The LDP tried to woo him by dangling Cabinet positions, but Tamaki preferred to play the role of an independent. So now, the LDP is in a weaker position, unable to rely on the DPP, and contending with a more powerful CDP.

One major consequence of this shift is the Budget Committee Chairmanship, which for the first time in 30 years has gone to the opposition (the CDP). This is huge. The Chair controls the questioning, sets the agenda, and exerts a lot of power over the direction of fiscal policy. The LDP is no longer in charge, and that changes the game.

On top of this, there are ongoing scandals involving the LDP and its financial practices, and the Upper House election coming up in summer 2025. The LDP wants to distance itself from this earlier scandal before then, but with investigations looming, this could make for a very rocky road ahead.

In short, the LDP is in a very bad spot. It’s facing internal division, external opposition, and a whole new way of doing politics in Japan. The next few months are going to be a real mess. Already, some policy issues are forced into a backseat position.

Ishiba’s Approval Rating Improves Slightly

Mr. Ishiba’s approval rating has shot up from a lackluster 32-33% to 48%. This is likely thanks to the recent reopening of the Diet, Cabinet reshuffles, and a public spat with Mr. Tamaki from the Democratic Party for the People (DPP). The scandal involving Tamaki, revealed just as the Prime Ministerial nomination was opening, didn’t help his cause. The timing of his sexual escapade revelation was brutal, especially considering his family ties and position as very-much-in-the-news DPP leader.

The LDP, possibly realizing that Tamaki is too much of a liability, might be shifting tactics. There’s speculation they might abandon him to secure the 12 votes needed elsewhere in the Diet, even from unaffiliated members (who hold significant sway at this juncture). These members usually vote based on personal convictions, adding another unpredictable element to the political landscape. Maybe easier pick-ups than the DPP?

Meanwhile, Ishiba has been making moves internationally, notably at the APEC Summit in Peru. At the summit, he met with key figures like America’s President Biden, China’s President Xi, and South Korea’s President Yun. Discussions with Yoon focused on North Korea, the abduction of Japanese citizens, the N. Korean soldiers being posted into Ukraine, and trade issues. This international engagement seems to be a way to boost his popularity at home, where his approval has been historically low. It looks like this helped.

The Diet will reconvene on November 28 (11 days from today) for a 30-day session. The big agenda item: a supplementary budget. There is also this contentious issue of raising the tax-free salary threshold from ¥1.03 million to ¥1.78 million, sparking tremendous debate. While Tamaki pushed for this, the LDP rejected it, arguing it would be too costly. There’s also tension with local governors who oppose the change, as it would cut the revenue they receive to run their prefectural duties… monies directed to them from the central government.

In the end, while the LDP wanted a coalition with Tamaki, the negotiations hit a wall. Tamaki’s demands were simply too much to swallow, leaving both sides at an impasse.

Upcoming Diet Session and Budget Discussions

The Diet will start in 11 days and run for 30, until December 27th. The LDP is in a tight spot. It needs 13 more seats to make a majority, which will likely mean alliances with other factions or individuals but —notably— not with the Democratic Party for the People (DPP), who they can’t reliably depend on. Expect plenty of behind-the-scenes maneuvering before the session officially begins. It is in fact already in full-swing!

One of the main topics will be the Supplementary Budget, which many expect to be larger than the previous one. It’s likely to include subsidies for gasoline and electricity, as well as direct payments to those in lower income brackets—potentially ¥20,000-30,000 per person or more for families with children.

A Supplementary Budget is for fast action to get cash flowing into the economy quickly. In this, it differs from the annual budget that doesn’t really take effect until the fiscal year following. But there’s a catch: agreeing to these subsidies could create a revenue shortfall of up to ¥8 trillion annually. This shortfall is comparable to a major consumption tax cut (roughly from the current 10% to ~7%?).

The LDP has also been sorting out Committee Chair assignments. They hold 8 Committee Chairs in the Lower House, with the CDP snagging 6. Meanwhile, Tamaki’s push to raise the tax-free income threshold from ¥1.03 million to ¥1.78 million is still a hot issue. It’s something that would mostly benefit students and working mothers. However, the LDP and others are pushing back, arguing it’s too expensive and would definitely add to the national debt. Prefectural Governors, for example, are already up-in-arms and protesting the DPP position.

The proposed direct financial support could cost up to ¥13 trillion annually. Despite this, since it’s part of a Supplementary Budget, it could be rolled out quickly and have an immediate impact. The public is watching closely, especially since the economy is showing only modest signs of growth. Everyone—especially the Bank of Japan—is keeping an eye on the yen, stock market, and international economic shifts.

Recent News and Issues

A 65-year-old American tourist recently caused a stir by carving his initials into a post at the Meiji Shrine in Shibuya. While such incidents aren’t common, it’s always shocking when they happen. Thankfully, it wasn’t a more sensitive location like Yasukuni Shrine. The man was arrested the following day, adding another unpleasant chapter to the story of nearly three million tourists visiting Japan monthly.

On the cybersecurity front, there’s been ongoing discussion about the government’s proposed and long awaited CyberDefense Bill. The chances of it going through the Diet before the year’s end are now exceedingly slim. This is mainly due to the ongoing LDP internal issues and dealing with the continuing campaign-funds scandal. The Bill could have boosted Japan’s cybersecurity and digital education. However, it looks like this crucial legislation will be delayed yet again.

Finally, there’s drama surrounding a $14.9 billion deal for US Steel to purchase Nippon Steel. The US government is scrutinizing the deal, with potential interference threatening to derail it. Many expect that US President Biden will keep it in the review stage, while former President Trump’s “America First” policy could complicate matters. Meanwhile, Nippon Steel’s vice president is negotiating with unions in Pittsburgh in a desperate attempt to close the deal by the end of the year.

Questions from the Audience Addressed Exclusively During the Briefing

• Could you comment on the differences between the coming Supplementary Budget of 2024 as compared with the full Annual Budget due April 1, 2025.
• Is it possible that the DPP demand for setting the minimum taxable income at ¥1.78m could be accomplished in the Supplementary Budget?
• There are reports that Prefectural Governors loyal to the LDP have raised concerns about the lessened tax revenue impacting their take of national budgetary resources.  Is this yet another obstruction by the LDP to the DPP’s goals … or is it reflective of the fact that the LDP lacks 12 members for a majority vote within parliament?
• Do you have any thoughts about why Ishiba was not in the APEC group photo? 
• Can you touch upon the fact that some of the slush-fund-scandal implicated Members of Parliament have been brought back into the LDP?
• Would you say that Nobuyuki Baba mishandled the management of his party (Ishin-no-kai)? Or did he just fail to see the issues clearly?
• There are so many supporters for Saito Motohiko in the Hyogo Governorship race. It seems we are seeing the rise of new leaders. What are your thoughts on this?

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.”