Japan plunged into political turmoil after voters punish ruling LDP
Coalition led by Prime Minister Shigeru Ishiba’s Liberal Democratic party loses parliamentary majority
Japan has been plunged into political uncertainty after voters delivered a harsh rebuke to the ruling coalition led by the Liberal Democratic party, stripping it of its parliamentary majority for the first time in 15 years.
The result leaves the LDP struggling to govern and put Prime Minister Shigeru Ishiba under pressure to resign just weeks after he took office. The yen fell almost 1 per cent against the dollar on Monday on speculation that political paralysis would delay further interest rate rises in Japan.
The loss of the coalition’s previously comfortable majority was a much more damaging outcome than most analysts had forecast and reflects surging discontent in Japan after years of stagnant wage growth and recent sharp increases in the cost of living.
“Looking at results, it is true voters have handed us a harsh verdict and we have to humbly accept this result,” Ishiba, who had called the snap poll in an effort to draw a line under a slush-fund scandal, told broadcaster NHK.
The LDP and its much smaller coalition partner Komeito fell well short of the 233 seats needed to control Japan’s lower house in Sunday’s poll. Official results showed the LDP had secured only 191 seats, while Komeito had 24.
The main opposition Constitutional Democratic party, led by former prime minister Yoshihiko Noda, made big gains, taking 148 seats, up from 98 seats previously. The party had focused its campaign on public revulsion at the slush-fund scandal.
Japanese equities rose on Monday, with the Nikkei 225 index up 1.7 per cent, driven partly by expectations that the yen would continue to weaken.
But in the longer term, equity strategists warned that the result would prove negative for stocks. While the LDP will remain the largest party, parliamentary gridlock could put a halt to its tentative pro-growth structural reform agenda.
“The attempts by the LDP to find a coalition partner, and the potential difficulty that will cause, means that it will not be able to implement policy, so the market will be cautious in coming weeks,” said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities.
Ishiba and his party will now begin a potentially weeks-long process of securing one or more coalition partners to form a government. Analysts said the LDP could be forced to compromise with several small, populist parties with fundamentally different policy agendas.
It could also consider readmitting a handful of parliamentarians whom it did not endorse because of their involvement in the slush-fund scandal.
Political analysts have said the loss would almost certainly force Ishiba, who was elevated just weeks ago and surprised many in his own party with the early poll, to resign. Were he to quit, Ishiba would become Japan’s shortest-serving leader of the modern era.
The scale of the LDP’s setback, its worst result since it lost power in 2009 to the Democratic party, a Constitutional Democratic party forerunner, is set to usher in a new episode for Japanese politics and mark the end of an era dominated by the policies of late prime minister Shinzo Abe.
Jesper Koll, an economist and long-term Japan watcher, said the result would intensify internal infighting and rivalries, making progress on reform almost impossible.
“In the world of money and investment, a key pillar to the bullish Japan thesis has been that Japan is a bastion of political and policy stability. After today’s election, this will become more difficult to argue,” Koll said.
Ishiba told NHK earlier on election night that it was premature to discuss whether he would step down and take responsibility for the loss.
But he told a rally on Saturday that the LDP, which has been in government for most of the past 70 years, was facing its “first major headwind” since it returned to power in 2012.
Ishiba’s unusually frank admission highlighted the risk of the snap election, which was intended to catch opposition parties off guard but instead gave voters a forum to vent dissatisfaction.
Constitutional Democratic party leader Noda had stressed that the election represented a chance to punish the LDP, which he said showed “no sign of remorse” for the scandal. He had called on voters to end an era of politics in which “the general public are made to look like fools”.
Overall turnout was low, reflecting in part disillusionment among many younger Japanese with mainstream politics. Kyodo News put voter turnout at 53.8 per cent, one of the lowest on record.
Kimihiro Okuma, a 79-year-old retiree and longtime LDP supporter, said on Sunday that he was planning to shift his vote to another party.
“As a capitalist country, we have been safe under the Liberal Democratic party, and I think that was good, but recently things have become outrageous,” he said. “I basically support them, but . . . they have not changed the fundamental nature of the party, and they should be punished.”