Japan’s ruling coalition seems to lose the majority in the upper town hall, according to ballot box surveys, a result that would further weaken the leadership of the currently in difficulty Shigeru Ishibari, and potentially destabilize markets.
A survey by the NHK public broadcaster showed that the governing coalition should earn about 32 to 51 of the 125 chairs in the election of Sunday, probably below the 50 needed to keep the majority in the House with 248 members. The Asahi newspaper estimated that the Ishiba Liberal Democrat (PLD) and its minor partner in the coalition, Komeito, would win 41 chairs together. Nikkei said the block should lose a significant number of chairs without estimating.
Ishiba indicated that he would remain as a leader despite the loss of chairs, arguing that the PLD is positioned to remain the largest party in both houses. Asked in separate TV interviews on Sunday he would continue as Prime Minister, Ishiba replied, “That’s right.”
“I still have several responsibilities that I must fulfill for the nation, including achieving wage growth above inflation, reaching a gross domestic product of a quatillion of yen and responding to an increasingly tense security environment,” said Ishiba. “Although the votes are still being told, we seem to have won the largest number of chairs among the parties.”
Still, the loss of the control of the High Chamber would make the government of Ishiba the first led by the PLD to rule with minority in both houses of Parliament since the formation of the party in the 1950s. It would be the second consecutive electoral setback for Ishiba, after a bad result in the low camera shortly after taking office.
The result threatens to launch its political agenda in greater clutter, complicate commercial negotiations with the US and potentially cost it. The last three PLD prime ministers who lost majority in the upper council resigned within two months, including Shinzo Abe in 2007 during their first term.
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The loss of the majority for governing parties would also increase uncertainty for investors, already concerned about weakening Ishiba leadership, which may lead the coalition to give in to opposition parties, including tax cuts. Market participants have expressed increasing concern about the ability of legislators to control spending, a factor that helped raise Japanese debt income to the highest levels by more than two decades.
Action and title markets will be closed on Monday due to national holiday in Japan. Iene will be negotiated since the beginning of the day, offering a first indication of how investors are digesting the outcome of the election.
“This is a more severe result than previous predictions indicated,” said Yusuke Matsuo, a senior market economist at Mizuho Securities Co. Continuous uncertainty about Ishiba’s permanence will weigh on actions, Matsuo added, while they would rise if the prime minister waived and there was a greater chance of cutting sales tax.
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The main opposition leader in Japan, Yoshihiko Noda of the Constitutional Democratic Party, ruled out to form any kind of coalition with the PLD. He said he would consider presenting a motion of distrust in the Baixa Chamber after hearing what Ishiba will say at a press conference probably scheduled for Monday.
“It seems clear that, for Ishiba, continuing in office will be an exceptionally challenging perspective in current circumstances,” said Chihiro Okawa, a political expert and professor at Kanagawa University. “When it comes to the question of those who would take the lead at this time, it becomes a matter of ‘taking chestnuts from fire’-an extremely risky and undesirable task. It is totally possible that no one is willing to take such a precarious position.”
The polls closed at 8 pm at local time after an election campaign centered on growing discontent with the high prices. Wages do not accompany inflation in a nation that has not experienced real increase in prices for over a decade, leading to an increase in votes for lower parties – including an emerging right -wing party that advocates an “Japan first” agenda.
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The least powerful upper chamber cannot appoint the prime minister, make a vote of distrust or prevent budget approval. But it may delay or block other legislation, potentially leading to a stalemate in the policy formulation process.
While almost all opposition parties advocate sales tax reduction to relieve pressure on families, the Ishiba government has stated that unique money payments are better because it has a lower impact on the country’s finances. The loss of the majority would make him dependent on the support of opposition parties to pass laws, pressuring him to make some kind of sales tax concession.
The dispute over spending takes place while Japan faces August 1 to close an agreement with US President Donald Trump before general US export rates rise from 10% to 25%. Such a measure would reduce Japan’s GDP by 0.9% in the medium term, according to Bloomberg Economics. Japan also faces Trump requests to further increase defense spending.
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NHK ballot research showed that the main opposition party, the CDP, should win between 18 and 30 chairs, probably more than the 22 before the election. The party argues to exempt sales from sales tax for up to two years.
The same research has indicated that the small democratic party for the people should earn between 14 and 21 chairs, compared to four currently by attracting younger voters seeking higher net income. Sanseito can earn between 10 and 22 chairs, a huge leap compared to the only chair it had before.
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