After years of relative stability, Japan has been plunged into political uncertainty after Sunday’s election delivered a shock trouncing to the party that has governed the country almost uninterrupted since 1955.
Shigeru Ishiba, the man elected earlier this month to head the ruling Liberal Democratic party in the hope that he could revive its flagging popularity, has stunningly failed in his mission.
The centre-right LDP has lost its parliamentary majority for the first time in 15 years, with Ishiba at risk of becoming the shortest-serving prime minister in Japan’s post-war history.
Ahead of the elections, the LDP and its long-term junior coalition partner Komeito had a stable majority of 279 seats while the LDP alone had 247. Now, the LDP retains just 191 seats.
The 67-year-old Ishiba replaced Fumio Kishida after he resigned as LDP leader and PM in the wake of the party’s political fundraising row.
But Ishiba has failed to draw a line under the so-called “slush fund scandal”.
For large swathes of the Japanese population, this election was less a vote “for” anyone in particular, than it was a vote “against” the incumbents. Sound familiar?
In another echo, after initially hinting that he was in no rush to call an election, Ishiba backtracked and took many off guard.
Though perhaps this short-sighted hastiness is a closer parallel with a certain leader across the Channel than it is with the UK’s own former PM: Ishiba made the gamble of calling a snap election in the hope that it would bolster his position, only for it to spectacularly backfire.
What now?
The clock is ticking on a 30-day deadline to form a government.
Ishiba argued today that he should remain in office to avoid a “political vacuum”. While he faces pressure to resign, he may succeed in clinging onto power since there is no obvious replacement. Japan’s opposition comprises eight different parties, none of which are anywhere close to reaching a majority.
A rainbow coalition government likely beckons, alongside a possible return to short-term prime ministers. When the LDP last lost power in 2009, Japan had three prime ministers from opposition parties in three years.
Prior to the unexpected result, foreign interest in Japan’s election had been minimal. And the markets were not preparing for a possible upset.
But there is every reason now to pay attention to this new period of political uncertainty in the world’s fourth largest economy.
Japan is in the middle of a rearmament programme to counter the threat of China and that rested, to some extent, on political stability.
Decisions made by Japan’s central bankers have global ramifications. Indeed, the global market panic at the start of August was largely sparked by the Bank of Japan’s decision to unwind what is known as the yen carry trade.
After the BOJ finally started raising interest rates in late July, the value of the yen strengthened against the dollar.
Today, it has taken a tumble, weakening 0.64% to 153.28. So it has given up all its post-rate-hike gains, and is as weak as it was in early summer.
Financial analysts are now predicting that Japan’s heightened political confusion could deter the country’s central bankers from hiking rates again. Meaning the Yen will stay weak. Which probably explains too why Japanese stock markets went up this morning.