Japan’s LDP Reaches Coalition Deal to Set Up Takaichi as Premier

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(Bloomberg) — Japan’s ruling Liberal Democratic Party will sign a coalition deal with the Japan Innovation Party later Monday, according to the smaller party’s leader, a move that would set up Sanae Takaichi to become the country’s first female prime minister.

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The LDP and the JIP, also known as Ishin, have broadly reached an agreement and will announce the deal at 6 p.m., Hirofumi Yoshimura, Ishin’s co-leader said.

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Combined, the LDP and Ishin, hold 231 seats in the lower house of parliament — still two seats shy of a majority — but divisions between opposition parties mean Takaichi would be all but certain to win the vote.

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A gathering of Ishin lawmakers from both houses of parliament that begins at 2 p.m. in Tokyo may be followed by a meeting between Takaichi and Ishin leaders in the evening to confirm the alliance before a vote in parliament tomorrow to elect a prime minister, national broadcaster NHK reported. NHK said the leaders of the two parties spoke on the phone earlier in the day and essentially struck a deal.

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Talks between the LDP and Osaka-based Ishin intensified in recent days. Ishin, which is the third-largest party in the lower house, has sought an agreement from the LDP on a temporary reduction of the sales tax on food, stricter rules on political funding and a reduction in the number of parliamentary lawmakers. Ishin’s other policy objectives include reforming Japan’s social welfare system to lower the burden on working-age people.

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Cutting back the number of lawmakers was an absolute must for the deal, Yoshimura said. He added that the LDP wasn’t planning to immediately ban corporate donations to politicial parties.

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A new coalition would give the LDP a more closely aligned partner on many policies than it had with its former ally, the centrist Komeito party, which surprised many by leaving the governing coalition earlier this month, citing differences with the party. Since then, she has scrambled to find alternative sources of support, which became more essential after the LDP lost seats in a lower house election last year and an upper house election this year.

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While Takaichi is a staunch conservative on social issues, including opposition to allowing women to become emperor, her views on the economy are similar to those of former Prime Minister Shinzo Abe’s platform known as “Abenomics.” She has long advocated for government spending to boost Japan’s economic growth rate and criticized the BOJ for tightening policy.

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During her campaign for the LDP leadership she took a more moderate stance, saying she doesn’t dispute the need for fiscal consolidation and would leave the specifics of monetary policy to the BOJ, but the yen has weakened and stocks have gained since her victory due to expectations of pump-priming and pressure on the central bank.

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The slide in the yen would likely exacerbate inflation, a top concern among voters, creating a dilemma for Takaichi if she intends to reprise a policy course that’s in line with Abenomics. 

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On issues such as security, foreign policy, and energy, the LDP and Ishin are largely aligned. Both support Japan’s security alliance with the US and want Japan to have a strong military, as well as better economic security, including supply chains that aren’t vulnerable to geopolitical risks. The parties are also in favor of bringing back more nuclear power into the nation’s energy mix after most nuclear plants were closed following the 2011 meltdown and radiation leak at the Fukushima Daiichi plant.

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—With assistance from Gareth Allan and Ryotaro Nakamaru.

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(Updates with comments from Ishin’s Yoshimura.)

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