Japan’s Ruling Party Forms Coalition, Paving Way for Takaichi as PM

Japan’s ruling Liberal Democratic Party (LDP) plans to sign a coalition agreement later today, setting the stage for Sanae Takaichi to potentially become the nation’s first female prime minister. The announcement from the Japan Innovation Party (JIP) comes just one day before a crucial vote in the lower house regarding Takaichi’s appointment, making her the fifth prime minister in as many years.

The coalition agreement was confirmed by Hirofumi Yoshimura, co-leader of the JIP, who stated, “After giving it careful thought last night, I telephoned LDP president Takaichi this morning to reach a coalition agreement.” The official signing will occur at 18:00 local time, he added.

Takaichi, 64, is recognized for her hardline stance on China and her traditionalist views within the LDP. She ascended to party leadership earlier this month, but her ambition faced challenges after the LDP’s coalition with the Komeito Party collapsed, following a scandal involving party funding. Komeito officials expressed concerns over Takaichi’s previous comments regarding China and her frequent visits to a Tokyo shrine that honors Japan’s war dead, including war criminals.

With a visit from US President Donald Trump scheduled for later this month in conjunction with the Asia-Pacific Economic Cooperation (APEC) summit in South Korea, Takaichi’s appointment is time-sensitive. Trump is expected to address unresolved trade issues between the US and Japan, including calls for Japan to cease Russian energy imports and increase its defense spending.

While the LDP’s new coalition with the JIP falls short of a majority in the lower house, Takaichi remains a strong contender. In a second-round run-off vote, she needs only to secure more support than her opponent. The announcement of the coalition has already had a positive impact on the markets, with the Nikkei 225 index rising more than three percent to surpass 49,000 points.

Analysts, like Yutaka Miura from Mizuho Securities, attribute the market surge to investor optimism regarding Takaichi’s potential for “proactive fiscal policies.” Known for her support of aggressive monetary easing and government spending, Takaichi has aligned her economic approach with the policies of her mentor, former Prime Minister Shinzo Abe, commonly referred to as “Abenomics.”

Despite her previous strong rhetoric on economic issues and foreign relations, Takaichi has moderated her stance during the leadership campaign. The new coalition government will need to collaborate with other parties to advance legislation, as it holds a minority position in both houses of parliament. The JIP has proposed several policies, including reducing the consumption tax rate on food to zero and abolishing corporate donations.

Takaichi faces significant challenges ahead, including managing relations with the United States and addressing Japan’s ongoing demographic crisis, characterized by a declining population and stagnating economy. She will also need to respond to the diminishing support for the LDP, which has maintained a near-continuous grip on power since 1955. Smaller parties, such as the populist Sanseito, are gaining traction by promoting controversial views on immigration, despite foreign-born residents constituting only about three percent of Japan’s population.

As the political landscape shifts, all eyes will be on Takaichi as she navigates the complexities of her new role and the pressing issues facing Japan.