(Bloomberg) -- Japan’s Liberal Democratic Party is set to lose its majority in Sunday’s election, according to a forecast from public broadcaster NHK, leaving in the balance whether the ruling coalition will hold on to power.
It’s unclear if the LDP and its ruling partner Komeito will secure the 233 seats needed to maintain a majority for their coalition in the lower house of parliament, NHK said based on exit polls. Similar surveys by other media pointed more clearly to the coalition losing its majority.
Prime Minister Shigeru Ishiba had aimed to secure at least the majority mark with Komeito, recognizing that the LDP would not retain the 247 seats it held before the election. Falling short of that goal would mark the first time the LDP has lost a coalition majority in an election since 2009.
“If we lose the majority, we’ll seek the cooperation of as many people as possible,” said Shinjiro Koizumi, the LDP’s election point man. He didn’t clarify if he was referring to the LDP’s majority or the coalition’s. “The LDP must change more radically, reflecting on this harsh judgment.”
If the coalition loses its majority, Ishiba’s policy goals, including ramping up funding for regional growth and raising taxes to pay for increased defense spending, would be thrown into doubt.
“If the LDP does indeed lose its majority powers, this could create a quagmire regarding the legislative process - a scenario which may not bode well for the yen and the Nikkei, at least in the short term,” said Tim Waterer, Sydney-based chief market analyst at KCM Trade.
Public support for the LDP has nosedived after revelations last year that party members were secretly enriching themselves with funds from supporters. Nearly every poll before the election suggested the LDP would lose seats and possibly its majority with Komeito due to the slush-fund scandal.
Ishiba took over the party leadership just last month as the LDP looked to make a clean break from the scandal that had eroded the popularity of former Prime Minister Fumio Kishida. He barred 12 lawmakers involved in the scandal from running as LDP candidates in the election, aiming to assert his authority and regain public trust. He may now need their support to remain in power.
“The LDP needs to get over 200 seats, or else it is in trouble,” said Rintaro Nishimura, a Japan associate at The Asia Group, an advisory firm. “The fact that the LDP appears to have lost its majority for first time since 2009 is an indication of how badly the Ishiba administration has rolled out its policies, in addition to the impact of the slush-fund scandal.”
The LDP is on track to win between 153 to 219 seats, according to NHK. The broadcaster sees the main opposition Constitutional Democratic Party winning 128 to 191 seats. In the 2021 election, the LDP ended up winning more six more seats than the upper end of NHK’s forecast in its exit poll.
If the LDP and Komeito fall short of their target and they are still unable to form a stable government with the help of independents, Ishiba may have to bring another party into the coalition. While some centrist opposition parties said before the election they might cooperate with the LDP on certain issues, none have expressed willingness to join the coalition.
“If the LDP needs other parties, what can Ishiba give to them?” said Nishimura. “Other parties may feel there’s no merit in helping out a sinking ship,” he said.
The LDP may face a similar situation to the lower house election in 1993, when it lost its majority but remained the largest party in parliament. After weeks of negotiations, seven opposition parties formed a coalition and pushed the LDP out of power for the first time since 1955. The coalition crumbled in less than a year and the LDP returned to government.
Nishimura from the Asia Group largely ruled out the possibility of the CDP securing enough seats to put together an opposition coalition capable of seizing power.
Still, even if Ishiba secures enough support to stay on as prime minister, the expected outcome will complicate his ability to pursue policy goals and might push him toward more populist measures, like additional welfare spending or even tax cuts.
“There are strong calls within the opposition parties for expansionary fiscal policies as well as consumption tax cuts, so I think the LDP may be pulled in that direction,” said Yuichi Kodama, economist at Meiji Yasuda Research Institute. “If the supplementary budget includes generous subsidies for price relief measures, there’s a good chance it will be oversized and long-term issues like fiscal consolidation will be delayed.”
--With assistance from Umesh Desai and Takashi Hirokawa.
(Adds more details from exit poll)
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