Japan’s voters head to the polls on Sunday in an election that could reshape the political landscape, with significant implications for Prime Minister Shigeru Ishiba’s coalition government. Amid rising living costs and a recent funding scandal, his coalition, led by the Liberal Democratic Party (LDP) alongside Komeito, faces the possibility of losing its parliamentary majority, according to opinion polls. The loss would challenge a decade-long hold on power for the LDP and could force Ishiba, who has been in office for only a month, into complex power-sharing talks with smaller parties.
A major factor influencing voters is Japan’s economic situation, as rising inflation has stretched household budgets. While the LDP is likely to remain the largest party, polling suggests a significant loss of seats, possibly pushing them below the 233 seats required for a majority. The Constitutional Democratic Party of Japan (CDPJ), the main opposition, could gain ground, with some surveys estimating it might win up to 140 seats.
If forced to seek coalition partners, Ishiba may negotiate with parties like the Democratic Party for the People (DPP) or the Japan Innovation Party, each of which has contrasting policy stances. The DPP supports halving Japan’s sales tax and calls for more effective resource allocation, while the Innovation Party has advocated stricter donation regulations. Either partnership could strain Ishiba’s ability to implement the LDP’s fiscal and monetary policies, creating potential challenges for the Bank of Japan (BOJ) amid rising inflation.
The election is poised to have substantial market implications. Investor concerns over political uncertainty have already impacted the Nikkei index, which dropped 2.7% last week.
