Japan Politics September 2021

Japan

Japan: What's at stake in the 31 October general election?

October 26, 2021

On 4 October, Fumio Kishida replaced Yoshihide Suga as prime minister of Japan following his victory in the ruling Liberal Democratic Party’s (LDP) leadership election on 29 September. Suga, who had only been in power for a year following Shinzo Abe’s resignation in August 2020, decided not to run for reelection as the leader of the LDP after a year plagued by successive waves of the Covid-19 pandemic—his handling of which has seen his popularity plummet in recent months. As the new PM, Fumio Kishida will lead the LDP into general elections on 31 October, and he inherits an economy burdened by a sizable fiscal deficit and rising public debt.

The general elections—which will see voters elect all 465 representatives of the powerful lower house of Japan’s legislature, which will in turn elect a prime minister and appoint a new cabinet—should see the LDP retain its majority. However, polls suggest it will lose some of its 278 seats amid tepid public support for Kishida. Moreover, on 24 October, the LDP lost an upper-house by-election to an opposition-backed candidate—a race seen as somewhat of a bellwether ahead of the general elections.

The LDP announced its election manifesto on 12 October, placing its focus on tackling the ongoing Covid-19 pandemic: PM Kishida has previously signaled his desire to compile a large supplementary budget before the end of the year, which will aim to support the economy as it recovers from the coronavirus crisis. The manifesto also reiterates the Suga-era commitment to promoting digital transformation and talks of “new capitalism” policies aiming to improve wealth distribution, although details are still fairly hazy.

Meanwhile, the largest opposition group, the Constitutional Democratic Party of Japan (CDP), put forward its campaign on 13 October, as it seeks to gain on the 115 seats it won in the last election. While the party paints itself as more progressive than the LDP regarding social issues, its positions on social safety nets and income distribution mirror quite closely those of the new PM, presenting the CDP with a stern challenge to differentiate itself from the LDP.

All in all, Takashi Miwa and Hajime Yoshimoto, economists at Nomura, see little change in the short term under a Kishida premiership, commenting:

“We retain our view that there is little likelihood in the short term of any major break from the economic policies of the previous administrations under Shinzo Abe and Yoshihide Suga. This reflects not only the necessity to focus on measures to tackle the Covid-19 pandemic but also the likelihood that Mr. Kishida will have to take a holistic approach that includes some of the policies of his rivals in the party leadership race to solidify his support within the party in particular ahead of not just the pending Lower House election but also the Upper House election slated for July 2022.”

FocusEconomics Consensus Forecast panelists project the economy to expand 2.5% in 2021, which is unchanged from the previous month’s projection, and grow 2.6% in 2022.


Author:, Economist

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