Japan opposition parties consider unifying behind PM candidate Tamaki

TOKYO – Japan’s main opposition parties will meet on Oct 14 as they weigh the possibility of uniting against ruling Liberal Democratic Party (LDP) leader Sanae Takaichi in a vote that could oust the long-ruling party from government. 

Following the shock collapse of the ruling coalition on Oct 10 after an alliance lasting 26 years, the prospects for the ruling Liberal Democratic Party’s new leader Takaichi becoming prime minister have become increasingly murky. 

The LDP has 196 seats in the more powerful Lower House, the largest bloc, but if the three main opposition parties coalesce behind a single candidate they would have 210. That would be enough to secure the premiership, provided other parties outside the LDP do not back Ms Takaichi.

The possibility of a change of administration without an election points to the increasing fragility of the LDP’s grip on power, as an array of smaller opposition parties find more success in reaching younger voters disillusioned with the ruling party’s efforts to deal with inflation, address issues linked to the influx of foreigners and clean up a funding scandal.

The political instability is also feeding into worries over the economic outlook, already heightened by US-China trade tensions.

The Nikkei 225 Stock Average fell as much 3 per cent amid a broad move away from risk assets in Asia on Oct 14. Yields on long-maturity Japanese government bonds rose on concern that government spending may increase under a new prime minister. Yields on shorter-dated debt declined, reflecting lower likelihood of a near-time interest rate hike by the central bank.

The main opposition parties are considering rallying behind Yuichiro Tamaki as a unified candidate. To do so, they must set aside their longstanding differences ahead of a vote to elect the prime minister expected next week.

Mr Tamaki is the leader of the Democratic Party for the People (DPP), a small populist party that has built support quickly through clear messaging and a promise to raise people’s take-home pay. With inflation topping voters’ list of concerns, the DPP’s strategy has resonated with households struggling with rising prices.

He said last week on X that he had the resolve to become prime minister.

If Mr Tamaki prevailed as a unified opposition candidate in the vote for prime minister, that would mark the first time the LDP is booted out of the government since 2009.

There is also a precedent for multiple opposition parties unifying behind a single candidate to become premier despite the LDP having the biggest bloc in Parliament. That happened in 1993, though the resulting government proved unstable, leading to the eventual return of the LDP to power.

“If we are to govern together, an alignment of policy is absolutely essential,” Mr Tamaki said during a news conference held on Oct 14, touching on the need for a solid administration. 

There is already a fair amount of common ground among the parties. The Constitutional Democratic Party (CDP), the Japan Innovation Party (Ishin) and the DPP all fought the upper house election with pledges to reduce the sales tax temporarily to help deal with inflation, though their proposals differed.

But Mr Tamaki has pointed to defence as a key issue that divides his party from the CDP. On Oct 14, he said the CDP’s policies must be realistic for there to be any possibility of governing. 

“Without alignment on security policy, as well as energy policy including nuclear power, the government would be unstable. Especially on security policy, we are in a situation where there cannot be even the slightest deviation,” Mr Tamaki said.

The CDP holds 148 seats in the lower house, the Japan Innovation Party (Ishin) has 35, and the DPP controls 27. Komeito, the party that bolted from the coalition on Oct 10, has 24. If all four parties ended up collaborating on an administration, they would get just over the threshold of 233 seats to give them a majority of 234 seats. 

While the CDP is one of the key driving forces seeking a change in government, its leader, former prime minister Yoshihiko Noda, would likely struggle to get enough votes to take on the leadership role himself. He stood down as premier in 2012 after overseeing the first rise in the sales tax in over a decade, an unpopular move that sits awkwardly with his current party’s stance on temporarily lowering it. 

Mr Noda rates lower than Mr Tamaki in opinion polls on who should be the next premier. A Nikkei survey conducted in late August said 4 per cent supported him, putting him behind Mr Tamaki’s 7 per cent. Despite being the biggest opposition party, the CDP has also fallen behind in popularity compared with Tamaki’s DPP in polls. 

In an interview with local media, Mr Noda said his main goal is to see the government change. He floated Mr Tamaki as well as Ishin co-leader Fumitake Fujita as possible candidates around whom the opposition could rally. 

As the opposition parties eye cooperation, Ms Takaichi continues to lay the groundwork for the possibility of becoming prime minister. She is considering tapping main LDP rival and Agriculture Minister Shinjiro Koizumi as defense minister, and Chief Cabinet Secretary Yoshimasa Hayashi as internal affairs minister, according to the Yomiuri newspaper. 

For investors, both choices likely mean more government spending and slower moves to raise interest rates. While the instability might cause short-term falls in equities, the policy direction might then lift stocks, while feeding into to a weaker yen and higher super-long yields with moves potentially larger in the case of a Tamaki-led administration.

The Nikkei and the broader Topix stock index set record highs last week. The yen, which has generally weaken in choppy trading over the last six months, swung from a loss to a gain versus the dollar on Oct 14. That reflected a move into haven assets and also came after Japanese Finance Minister Katsunobu Kato said the government was closely watching any excessive or disorderly moves in the foreign exchange market. 

“Neither a Takaichi government nor a Tamaki government is stable,” wrote Mr Pelham Smithers, managing director of Britain-based Japan equity research firm Pelham Smithers Associates, in a note.

“Ironically, political turmoil is not a negative for the stock market, if anything, it is a positive. A political crisis basically forces the BOJ onto the sidelines, and in turn exacerbates the ‘behind the curve’ element,” he added. Bloomberg