Japan's LDP loses majority: MADANI must react appropriately

On October 28th, Japan went to the polls to elect a new parliament after newly elected Prime Minister Shigeru Ishiba called for a snap election upon winning his party's leadership contest to succeed the outgoing Party President and Prime Minister of Japan, Fumio Kishida. Going into the election, it was widely predicted that the ruling Liberal Democratic Party (herein referred to as the LDP) and its coalition partner, Komeito, would remain the largest bloc in the House of Representatives, Japan's lower house and make up half of its National Diet. As a Malaysian, I analyze what does this mean for our 5th largest importer and exporter? What can the current government do in the wake of the election to stabilize?

LDP's scandal, resignation of Kishida and rise of Ishiba

This slush fund scandal emerged in the dying months of 2023 which is about underreported income from political fundraising party tickets sold by various LDP factions, and the most notable one being the Seiwa Kai, nicknamed the "Abe faction", named after long-term leader and recently deceased former Prime Minister, Shinzo Abe. Prosecutors have estimated that at least 970 Million Yen have been involved over a five-year period between 2018 (inclusive) and 2022.  

Within the various party factions, individual members were set a quota of tickets to sell for each fundraising event based on seniority. Any excess profits beyond the quota would be returned to the MP themself or put into a factional fund. While not illegal, Japanese law has laid out strict guidelines of what the money can and cannot be used for, and it must be declared. However, factions within the LDP, like the Abe faction, did not do so and have been criticized by the opposition, none more strongly than the main opposition party, the Constitutional Democratic Party of Japan (herein referred to as CDPJ). 

In mid-December, Prime Minister Fumio Kishida was forced to sack a lot of his ministers, including senior ministers like Yasutoshi Nishimura - the Minster for Economy and senior LDP members like Koichi Hagiuda, a prominent Abe faction member - and former Economic Minister. Following this, many prominent Abe faction members resigned from their posts in national leadership. The scandal became so widespread that Kishida's own faction got prosecuted in mid-January when they failed to report 30 Million Yen in fundraising activities over a three year period - but Kishida is not expected to be charged for this error.

However, the pressure was too much for Mr Kishida as he announced that he would not seek reelection as President of the LDP in August this year. Cabinet Approval Rating plunged to 17.1% in December 2023, LDP party membership reached record lows and public dissatisfaction with the economy. He gave up his role as President of the LDP and, by extension, the top job in Japan - the Prime Minister's role. His resignation triggered the most openly contested races in history, as there was no one person as a clear frontrunner. In the end, former Defence Minister and longtime lawmaker, Shigeru Ishiba won out and delivered on his promise of snap elections to gain a mandate from the public and maybe increase the LDP's party majority as so many new leaders have enjoyed after taking over from an unpopular predecessor. 

Election results, its significance and politicking

Now that the dust has settled, we can actually see the aftermath of this smacking given to the LDP and Komeito, the ruling parties, as they suffered a 76 seat loss collectively, bringing them to a total of 215 seats, the largest faction but still short of a majority - which stands at 233 seats. In second place, and picking up 52 seats in a generally good night for the centre-left, the CDPJ won 148 seats - well short of an overall majority. Still, it now has a louder caucus to take the fight to the LDP instead of just being an ineffective opposition. Ishin, a Japanese Party which are seen as neoconservative and economic liberal - similar to that of the Republican Party of George Bush and Dick Cheney, won 38 seats, while the Democratic Party of the People [DPP], a moderate conservative party, won 28 seats with other parties like the Communists and Reiwa making up the rest of the numbers. Ever since 1955, when the LDP was formed, they have basically ruled Japan unchecked save for two small blips - 1993 and 2009. After 15 years of unchecked LDP power, the voters gave a rejection of the LDP, forcing the LDP to come to the negotiating table for the first time in over 30 years. However, the path to government may be more complex. DPP and Ishin have already ruled out a coalition with the DPP, meaning that ideologically - the LDP cannot form a majority government. There are only two ways to go about this: a minority government or a coalition/power-sharing agreement with some of the other parties, but time is running out, as they only have 30 days to sort out a government. 

Falling Yen and MADANI

This result has further damaged a deflating Japanese economy. In the past 24 hours, the Yen had slipped 0.13% against the Ringgit and fell 0.60% against the US Dollar [at the time of writing], weakening the Yen after what can only be described as a, to quote former President Obama, "shellacking" for the ruling Japanese parties.

As Japan is our fifth largest importer and exporter, the Malaysian government must keep a close eye on the government formation process in Japan. Should the LDP and Prime Minister-apparent Ishiba form a minority government, the government must look elsewhere to export to. It makes economic sense not to sell goods in a politically unstable country when we, ourselves, are an emerging and developing economy struggling to fend for ourselves amongst the bigger players. Whilst I am not advocating for the total ban on exporting goods to Japan, I am advocating for selling goods that were bound for Japan elsewhere in order to bring in the export money that we rely on to prop up our government coffers. Should the LDP and Prime Minister-apparent, Ishiba form a stable government coalition that won't suddenly collapse like many other Japanese governments before it, it would be best to restore trade to normal with them so as not to damage Malaysian-Japanese relationships in the future.