Shigeru Ishiba is Japan’s new prime minister. The 67 year old LDP MP has long coveted the position. He found success at last on his fifth attempt to assume the role.
His victory was welcomed by the party’s moderate wing. Ishiba saw off right-wing candidate Sanae Takaichi. A centrist by nature, he pledges to accelerate Japan’s energy transition and supports legislation to allow women to become reigning empresses. The LDP’s rank and file hopes his pragmatic approach helps the party recover from years of scandal. Ishiba’s predecessor Fumio Kishida was the latest figure tarnished by corruption allegations after speculation that the party was under-reporting political funding.
japanese election
After just three days in power, Ishiba called a snap election for 27th October. Few anticipate the LDP losing its majority. Despite its current predicament, the party has been in opposition for just six years since 1945. But Ishiba will hope to boost its standing in the parliamentary Lower House and provide a bigger and more stable majority.
japanese foreign policy
International media is focusing on what this change of leadership means for Japan’s foreign policy. Ishiba is seen as less sabre-rattling in this respect. His leadership rivals were certainly keener on pursuing Japanese remilitarisation.
But some of Ishiba’s rhetoric suggests his approach will antagonise both China and the USA. He has previously suggested setting up an “Asian NATO” to counter the former. And he has talked about fixing a “lopsided” relationship with the latter. That’s unlikely to please either incoming US administration. Both sides’ foreign policy camps rely on a loyal Japan.
However, Japanese commentators largely expect business as usual. The former Japanese Ambassador to the United States Koji Tomita pointed to Ishiba’s past posting as defence minister. As a member of then Prime Minister Yasuo Fukuda’s cabinet, Ishiba belied his maverick status and largely supported the Atlanticist LDP consensus.
His views on neighbour South Korea may ultimately lead the US establishment to view him as an asset. We’ve previously written about the two US allies’ improving relationship. Described as a “dove” by South Korean media, Ishiba wants Japan to take greater accountability for its action in World War II. Its failure to do so lies behind much of the animosity between nations that otherwise share common interests.
japanese economy
International investors will be more concerned with Ishiba’s economic plans. 2024 has thus far been a year of cautious optimism for Japanese markets. Its benchmark Nikkei 225 finally surpassed its 1989 high. Can the country shrug off 35 years of stagnant growth?
Policymakers have been encouraged by tentative signs of inflation. It was enough for the Bank of Japan to abandon negative interest rates in March. But its 0.25% interest rate still lags far behind the US and other Western nations, even as those economic loosen monetary policy. After a brief recent resurgence, the yen remains weak against the dollar.
Ishiba’s early comments suggest little appetite to race towards monetary policy normalisation. In Tuesday’s meeting with Kazuo Ueda, he told the BOJ governor that he doesn’t believe the economy is ready for another rate hike. If interest rates remain low, we’re unlikely to see any great forthcoming rebound in the yen.
That will be good news for Japanese companies with global operations. Profits will swell as overseas revenues are converted into domestic currency. The Nikkei may be set for new highs.
But there is little upside for domestic consumers and smaller businesses. Food and energy imports will continue to be expensive. Around 70% of the Japanese workforce is employed by these smaller enterprises. If costs remain high, they cannot offer the pay rises needed to stimulate wage inflation and a return to consistent economic growth.
japan’s domestic politics
And that feeds into a wider challenge for any Japanese premier: how to address a narrative of managed decline. Economist Sayuri Shirai points out that Japan is already ageing at the fastest rate in the world. A third of its citizens are aged 65 or older and its domestic market is shrinking.
Shirai refers to this in the context of the country’s cash-centric economy. She comments that retailers want to avoid the costs associated with digital payment services. Why incur extra costs if revenues are only going to decrease?
demographics
To tackle that issue in the long-term, Ishiba has to address Japan’s demographic crisis. His more liberal approach to social issues might help. He talks of improving maternity rights and changing a culture that perceives parenting as solely a female responsibility.
In the shorter-term, he needs to revitalise consumer confidence. That means encouraging the Japanese to believe their country’s most prosperous days still lie ahead. And even more pressingly, he needs them to believe the LDP is pursuing that rather than satisfying their own material interests.
japan: a new start
Japan has experienced many false dawns since its meteoric rise was derailed in the 1980s. Can a political veteran finally provide the fresh restart it needs?
