(Bloomberg) -- The Liberal Democratic Party has ruled Japan for all but about four years since the movement’s founding in 1955, but lost its majority in an election on Oct. 27, creating political uncertainty at a time of heightened global anxieties. A new government must be formed by the end of November, with both the LDP and the main opposition party seeking enough support from smaller parties to run the world’s fourth-largest economy. LDP policy priorities such as tax hikes to pay for increased spending for the military may have to be adjusted to win over the small parties, most of whom want tax cuts and more money for households.
What could change in how Japan is governed?
The center-right LDP and its long-time junior coalition partner, Komeito, have so far indicated they are trying for a minority government and not seeking a new partner. This means they’ll need to cooperate with some of the smaller parties on issues where they agree. It also means the LDP may struggle to set and implement its political agenda.
The main opposition group, the Constitutional Democratic Party, would need to forge a coalition among a wide swathe of parties — from communists to conservatives. Such a group would be hard to form and hard to hold together. When an opposition-led coalition was crafted in the 1990s, it lasted less than a year. It was replaced by a minority government with the LDP in control.
What’s at stake for the US?
Japan’s territory stretches from near Russia’s Far East to Taiwan, making it a crucial partner for Washington in confronting an increasingly assertive China. There’s a consensus among all the main parties around upholding Japan’s close alliance with the US, and the two countries are expected to continue cooperating closely on common security challenges. Some parties are nevertheless seeking adjustments to the rules governing the presence of American military personnel in the country.
The outlook is more uncertain when it comes to economic cooperation. A weak Japanese government may have difficulty in reconciling the competing interests of its preeminent strategic partner the US and its dominant trading partner, China.
President Joe Biden’s government has pressured Tokyo to strengthen restrictions on the export of semiconductors and related equipment to China, with a special focus on chips needed for artificial intelligence applications. Beijing officials have threatened retaliation in meetings with their Tokyo counterparts.
What are the key numbers for a new government?
The election left Japan without a clear winner for the first time since the 1990s. It takes 233 votes in the powerful lower house of parliament to form a government. The LDP and partner Komeito now have 215. The opposition camp and all non-affiliated lawmakers have 250 — with the CDP having the highest tally among that group with 148 seats.
Who are the kingmakers?
The key players are the Democratic Party for the People (DPP) with 28 seats and the Japan Innovation Party, or Ishin, a right-leaning party with roots in the city of Osaka that favors small government. It has 38 seats. The leaders of each party have dismissed the idea of joining the LDP and Komeito coalition. DPP leader Yuichiro Tamaki has held talks about cooperating with the LDP on specific policies, but says he won’t align the party too closely with the LDP.
How does the process work?
A special session of parliament will convene from Nov. 11 to elect a new prime minister, who will then appoint a new government. Going into the vote, opposition parties have been divided, which leaves the door open for Prime Minister Shigeru Ishiba of the LDP to keep his job.
But the DPP and the other opposition parties also have enough votes to defeat bills introduced to parliament by the LDP and its coalition partner Komeito, or to pass a no-confidence motion that could sink the Ishiba administration.
Each house of parliament must convene within 30 days of the general election to hold separate votes for prime minister. If the bodies choose different people, the lower house’s decision takes precedence. If nobody gets a majority, a runoff is held between the two leading candidates. In that vote, a plurality is sufficient to win.
What policies might be on the table?
Ishiba had been looking to reach a decision on the timing of tax increases to fund ramped-up defense spending, but that may have to be sacrificed to win over the groups the LDP needs to stay in power. They have been calling for tax cuts and more spending on programs providing relief to households from inflation — adding to what is already the world’s heaviest national debt burden.
The DPP is seeking tax breaks for part-time workers and expanding non-taxable income. Making these priorities a reality could be a relatively easy move for Ishiba.
Nuclear power is also coming into focus. It used to account for around a quarter of Japan’s electricity mix prior to the devastating earthquake and tsunami that hit the country in 2011 and led to a meltdown at the Fukushima Dai-ichi Nuclear Power Plant. Nuclear provided 6% of the country’s power as of March 2023, according to the latest official data. The CDP aims for Japan to become carbon neutral by 2050 without reliance on nuclear power, while potential kingmaker the DPP wants nuclear to remain part of the power supply.
What are Ishiba’s prospects?
Ishiba took office on Oct. 1. The LDP may not want another leadership election so soon, but his days appear numbered. Even if he can broker a deal to remain, the bruising at the ballot box left his policy goals damaged. The LDP offered the post of premier to a smaller party the only time it formed a minority government about 30 years ago. Socialist party leader Tomiichi Murayama served as prime minister in that arrangement.
--With assistance from Yuki Hagiwara and Brian Fowler.
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