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Japanese voters strip LDP coalition of parliamentary majority

Japan’s ruling coalition led by the Liberal Democratic party has lost its parliamentary majority, in an unexpected rebuke by voters that plunges the country into political uncertainty.

The LDP’s worst electoral reversal for 15 years, which will leave the party struggling to govern and recently anointed Prime Minister Shigeru Ishiba under pressure to resign, came in a snap election he called to try to draw a line under a slush-fund scandal.

The yen fell almost 1 per cent against the dollar on Monday morning on speculation that political paralysis would delay further interest rate rises in Japan, as Ishiba and his party will begin a potentially weeks-long process of securing one or more coalition partners in order to form a government.

The loss of the coalition’s previously comfortable majority was a much worse result for the party than most analysts had forecast and reflects surging discontent in Japan after years of stagnant wage growth combined with recent sharp increases in the cost of living.

“Looking at results, it is true voters have handed us a harsh verdict and we have to humbly accept this result,” Ishiba told broadcaster NHK in an interview.

NHK seat counts showed the LDP and its much smaller coalition partner Komeito fell well short of the 233 seats needed to control Japan’s lower house of parliament. With all seats declared by 5.45am on Monday, the LDP had secured only 191, while Komeito had 24.

Economists had warned that the electorate’s unexpectedly severe punishment of the LDP could trigger volatility in markets. Japanese equities rose on Monday, with the Nikkei 225 index up 1.7 per cent, driven partly by speculation that the yen would continue to weaken.

In the longer term, however, equity strategists warned that the election result would prove negative for stocks. While the LDP will remain the largest party, parliamentary paralysis could put a halt to its tentative pro-growth structural reform agenda.

“The attempts by the LDP to find a coalition partner, and the potential difficulty that will cause, means that it will not be able to implement policy, so the market will be cautious in coming weeks,” said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities.

Analysts said the LDP’s failure to achieve a coalition majority would force it to court parties that had previously said were not interested in a partnership with the ruling party. The LDP may also consider readmitting a handful of members of parliament whom it did not endorse for this election because of their involvement in the slush-fund scandal.

The rush to secure allies could also force the LDP to compromise with several small, populist parties following fundamentally different policy agendas.

A woman in a kimono in a voting booth
Japan’s voters have kept the LDP in government for most of the past 70 years © Richard A. Brooks/AFP via Getty Images

The main opposition Constitutional Democratic party of Japan, led by former prime minister Yoshihiko Noda, made big gains, taking 148 seats by 4.30am, up from 98 seats previously. The party had focused its campaign on public revulsion at the slush-fund scandal.

Political analysts have said the loss of a coalition majority will almost certainly force the resignation of Ishiba, who was elevated to the role just weeks ago and who surprised many in his own party by calling an election in record time. Were he to quit, Ishiba would become Japan’s shortest-serving leader of the modern era.

Ishiba told NHK earlier on election night that it was premature to discuss whether he would step down and take responsibility for the heavy reversal.

The scale of the LDP’s setback appears likely to usher in a new episode for Japanese politics and to mark the decisive end of the era dominated by the policies of late prime minister Shinzo Abe.

Jesper Koll, an economist and long-term Japan watcher, said the result would intensify infighting and rivalries inside the LDP, making progress on reform almost impossible.

“In the world of money and investment, a key pillar to the bullish Japan thesis has been that Japan is a bastion of political and policy stability. After today’s election, this will become more difficult to argue,” Koll said.

Overall turnout was very low, reflecting in part a view expressed by many younger Japanese that mainstream politics is no longer able to solve the country’s many problems. Kyodo News put voter turnout at 53.8 per cent, one of Japan’s lowest on record.

Retiree Kimihiro Okuma, a longtime LDP supporter, said earlier in the day he was planning to shift his vote to another party.

“As a capitalist country, we have been safe under the Liberal Democratic party, and I think that was good, but recently things have become outrageous,” said Okuma, 79. “I basically support them, but . . . they have not changed the fundamental nature of the party, and they should be punished.”

It was by far the LDP’s worst result since it lost power in 2009 to the Democratic party, a forerunner of the CDPJ.

Ishiba told a rally on Saturday that the LDP, which has been in government for most of the past 70 years, was facing its “first major headwind” since it returned to power in 2012.

Ishiba’s unusually frank admission highlighted the risk he took in calling the election just a few days after being sworn in.

A move intended to catch the opposition parties off guard and secure a clear public mandate instead gave voters a forum to vent their dissatisfaction. 

In his last day of campaigning, CDPJ leader Noda had stressed the opposition party did not expect to win a majority, but the election represented a chance to punish the LDP. 

Noda said the LDP showed “no sign of remorse” for the scandal that had dominated headlines for months and called on voters to end an era of politics in which “the general public are made to look like fools”.

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