A New Normal?: Navigating Japan’s Shifting Political Currents

Commentary by Yuko Nakano

Published December 12, 2024

The past four months have brought dramatic changes to Japanese politics. In August, Prime Minister Kishida Fumio stepped aside ahead of the Liberal Democratic Party (LDP) leadership election, a move that set the stage for an unusually competitive race featuring nine candidates. Defying expectations, Ishiba Shigeru prevailed-an outcome that few predicted even as recently as the summer. Ishiba then called a general election in late October, where the ruling coalition of the LDP and its junior partner, Komeito, lost their majority in the lower house of the National Diet (Japan's parliament). The coalition now faces the challenge of collaborating with opposition parties, ushering in a period of uncertainty.

While the Ishiba government is expected to prioritize budget negotiations and economic policy in the near term, it has not overlooked diplomacy and defense strategy. This includes Foreign Minister Iwaya Takeshi's recent visit to Ukraine, where a bilateral security information agreement was signed, and Japan's participation in a joint patrol with the United States and the Philippines in the South China Sea aimed at countering escalating Chinese coercion. As Japan seeks to maintain its role as a global partner of the United States, restoring calm waters at home is essential.

Upper House Election Post-Mortem

Source: Congressional Research Service, "Insight,"December 2, 2024, https://crsreports.congress.gov/product/pdf/IN/IN12466.

Pre- and post-election public opinion surveys reveal several key sentiments: (1) voters felt that the LDP's disciplinary actions against members implicated in a fundraising scandal, which engulfed Japanese politics for the past year, were insufficient; (2) while voters continued to support the LDP, they held reservations about the main opposition party, the Constitutional Democratic Party of Japan (CDP), and its ability to govern effectively; and (3) many preferred a power-sharing structure, with the LDP retaining control.

These views are reflected in the election results: (1) of the 46 candidates implicated in the scandal who sought re-election, only 18 succeeded in retaining their seats; (2) the LDP suffered losses in both single-seat districts and proportional representation, although it remains the largest party in the chamber; (3) the opposition saw mixed results, with the CDP as well as the Democratic Party for the People (DPP), a relatively small center-right party whose influence has grown after quadrupling its representation from 7 to 28 seats, gaining seats, while the Japan Innovation Party (JIP) lost ground; and (4) in proportional representation, the CDP's vote share increased only marginally, by 0.6 percent, compared to the 2022 Lower House election.

It is not uncommon for Japanese voters to split their ballots, selecting candidates from one party in single-seat districts and another party in proportional representation. This pattern illustrates a certain level of voter dissatisfaction with the LDP but not to the extent of handing full control to the opposition.

Exit polls also reveal an erosion of LDP support among both traditional backers and unaffiliated voters, particularly young and urban groups. Many chose to abstain or shifted their votes to smaller parties, including the DPP, as well as emerging populist groups such as the Conservative Party of Japan (gaining 3 seats from none) and another right-leaning Sanseitō (from 1 to 3 seats) or the liberal Reiwa Shinsengumi (from 3 to 9 seats). Policies such as incremental immigration reform and the ongoing debate over a selective dual surname system, which have become points of division within the LDP, may have alienated certain conservatives, while young voters were drawn to the DPP's focus on boosting income and improving opportunities for their generation.

Working with the Opposition

As a minority government, the LDP and Komeito now require an additional 13 votes outside of the ruling coalition to pass legislation, and they have taken steps to establish frameworks for cooperation with opposition parties.

One significant move was the allocation of seven out of 17 standing committee chairmanships to opposition parties, with the influential Budget Committee going to the CDP. This marked a notable increase for the CDP, which now holds five posts, while the DPP and JIP secured one each. While this concession could risk potential parliamentary gridlock, it also fosters shared responsibility in passing the budget, potentially moderating the CDP's inclination to obstruct critical debates.

The ruling coalition also reached out to the DPP, and the three parties have been engaged in discussions on tax reform over the past few weeks. The DPP's proposals, such as raising the nontaxable income threshold from JPY 1.03 million (approximately USD 6,800) to possibly up to JPY 1.78 million (USD 11,800) to encourage part-time workers from taking on extra shifts, have been incorporated into a JPY 39 trillion (approximately USD 250 billion) stimulus package approved by the cabinet, reflecting cooperation between the ruling coalition and the DPP. However, the specifics-including funding mechanisms-remain under negotiation.

Legislative Action Items

The Diet's current short session, ending on December 21, focuses on passing a supplementary budget of JPY 13.9 trillion (USD 92 billion), which supports the aforementioned stimulus package aimed at alleviating inflation's impact through wage increases, utility subsidies, and direct handouts to low-income households and families with children. It also focuses on encouraging investments, particularly in small- and medium-sized businesses and rural areas.

The supplementary budget and the economic stimulus package are directly linked to the tax reform outline for FY 2025, an annual document the government plans to release by the end of December. Key discussions include the nontaxable income cap as well as a timeline for tax hikes to finance higher defense spending, which the DPP has opposed. The government intends to propose raising the corporate and tobacco taxes in April 2026 and the income taxes in January 2027 to finance the defense spending increase, now at 1.6 percent, to 2 percent of GDP by 2027, as stipulated in the 2022 National Security Strategy.

Additionally, revisions to the political funding law remain a contentious issue. Following a June update to the original legislation prompted by the previously mentioned fundraising scandal involving several dozen LDP lawmakers, opposition parties continue to press for stricter reforms. In the latest round of negotiations, the ruling parties agreed to abolish "policy activity funds"-discretionary funds provided to LDP lawmakers by the party without disclosure requirements-but have been reluctant to ban corporate donations, a point of division even among opposition parties. With widespread skepticism about further political reforms, the LDP faces a tall order in convincing the public of its commitment to change.

Looking Over the Horizon

When the Diet reconvenes in January, the government's top priority will be passing the budget proposal for the new fiscal year, beginning in April. For now, the LDP and DPP appear open to negotiating on wide-ranging issues, and continued dialogue could enable the government to secure enough opposition support to pass the budget before the new fiscal year begins.

The next major political test will be the Upper House election, due to take place by July 2025. While this presents an opportunity for opposition parties to gain ground, only half the chamber is up for reelection, making it less likely for the ruling coalition to lose its majority. Even so, an erosion of the ruling coalition's seat count could signal further public dissatisfaction and complicate the government's ability to advance future policy agendas.

Prime Minister Ishiba could face earlier challenges, depending on how the political dynamics evolve. Once the new fiscal year budget is passed in the spring, opposition parties might consider no-confidence motions, forcing the prime minister to choose between resigning his cabinet or dissolving the Lower House within ten days, triggering another snap election.

Looking ahead, the political landscape could unfold in several ways:

• Opposition Coalition: Opposition parties could unite and form a coalition capable of ousting the LDP and Komeito, though this remains unlikely given their policy differences and fragmented cooperation in the past.
• Minority Government Continuation: The ruling coalition might maintain a minority government for the foreseeable future, relying on the DPP or expanding partnerships with other parties. However, sustaining such arrangements could prove challenging, as they would require continuous concessions from all sides.
• Snap Election: The LDP may seek to restore its majority by calling a snap election of the Lower House, potentially timed with the Upper House election in the summer. If the LDP decides to pursue this option, they may opt to elect a new leader before the elections. This strategy would depend on various factors, including public approval ratings for both the Ishiba government and the LDP.
  

At present, there are no overt signs within the LDP to challenge Ishiba's leadership, and his government maintains a reasonable level of public support, with his approval rating currently around the 40s. While Japan's political situation appears relatively stable for now, beneath the surface, there are intertwining factors that could trigger further challenges. Whether this period of uncertainty represents a temporary aberration or the beginning of a more lasting realignment remains an open question, which will be shaped by the ruling coalition's ability to adapt and regain public trust in the months ahead.

Yuko Nakano is a fellow with the Japan Chair and associate director of the U.S.-Japan Strategic Leadership Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

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