What next for Japan? Ruling party loses majority after scandals and soaring inflation

Prime Minister admits results are ‘tough’ as gamble on snap election backfires

Japan’s scandal-ridden ruling party lost its majority for the first time since 2009 in Sunday’s general election, sparking untimely political turmoil in the world’s fourth-largest economy.
The results mark a major blow for Prime Minister Shigeru Ishiba, who announced the snap election earlier this month, just days after being elected leader of the conservative Liberal Democratic Party (LDP) and gambling on the public’s endorsement.
However, in an unusually dramatic turn for a nation long viewed as a stalwart of stability, the LDP and its coalition partner Komeito secured only 215 seats in the powerful lower house of parliament, compared with its pre-election total of 279 – widely missing its goal of crossing the majority threshold of 233.
The results mark a significant power shift on Japan’s traditionally stable political landscape and cast growing concerns over the future direction of the ruling party, which has ruled the nation for almost all of its post-war history.
Its tenure has been hit hard by a string of high-level scandals combined with soaring inflation, a longtime weakened yen and growing regional instability, all fuelling growing discontent with the political status quo among the Japanese public.
“This election has been very tough for us,” a sombre-looking Mr Ishiba told TV Tokyo on Sunday evening.
However, Mr Ishiba vowed on Monday to stay in office despite his party’s failure to secure majority votes – and promised “fundamental reform”.
Pledging also to take steps to avoid a “political vacuum”, he told a press conference in Tokyo: “I want to fulfill my duty by protecting people’s lives.”
He added: “I will enact fundamental reform.”
The yen had dropped to a three-month low, as analysts prepared for extensive wrangling in the coming weeks, with the constitution stating that parties now have 30 days to work out a grouping that can govern.
After the results were confirmed early Monday, the options facing Mr Ishiba were both bleak and limited. 
The PM is likely to struggle to form a new government, with the LDP expected to try to join forces with other parties in its coalition, negotiating from a significantly weakened position – or otherwise face governing with limited powers via a minority government.
“Whether or not prime minister Shigeru Ishiba resigns as LDP leader today, it seems unlikely that he will survive to lead a new government as prime minister … though it is possible he could stay on as caretaker,” Tobias Harris, founder of Japan Foresight, a political risk advisory firm, told media before Mr Isihiba’s Monday press conference.
The situation appeared brighter for the Constitutional Democratic Party of Japan (CDPJ), which scooped 148 seats, marking a sharp rise from its 98 seats, although still far short of the 233 majority, reflecting the fragmented state of the opposition landscape.
The election outcome means that many of Mr Ishiba’s pledges will be in jeopardy, including his promise of initiating a proposal to revise the country’s constitution before a national referendum, which would require approval by a two-thirds majority in parliament.
Mr Ishiba announced the election earlier this month, just three days after he was voted leader of the ruling LDP, which has been hit hard by a string of scandals and record low approval ratings.
A series of political funding scandals and the on-going challenges of inflation sparking a cost-of-living crunch across the nation were key issues that likely swayed election results.
Other topics in the spotlight for voters include the long-standing debate over whether married couples should be allowed to choose separate surnames, with the ruling LDP still wary of amending the 1869 civil code, in contrast to many opposition parties which support a revision.
Japan’s demographic crisis was also high on the agenda, with Mr Ishiba pledging to boost rural regions with shrinking, aging populations and create more family-friendly work conditions to help boost birthdates.
As conflicts continue to flare across the globe, growing regional security tensions were also a red hot topic, with Mr Ishiba – who describes himself as a “security geek” – prioritising strengthening US ties and voicing support for a regional military alliance to counter the rising powers of China.
However, the momentum LDP election campaign was deeply undermined by ongoing public anger over one of the country’s biggest party scandals in decades, involving allegations of millions of pounds worth of undocumented political funds.
The main opposition CDPJ, led by the former PM Yoshihiko Noda, was keen to capitalise on growing discontent with the ruling LDP, which has been tainted by a string of political scandals.
The yen sank to a three-month low on Monday as investors figured the loss of a parliamentary majority for Japan’s ruling coalition in weekend elections would slow future rate rises, while the dollar headed for a monthly gain on rising US yields.
In the Asian session, the yen dropped 1 per cent to 153.84 per dollar and by a similar margin against the euro to 165.87 , on both counts its weakest since late July.
But Tokyo stocks rose. Analysts say the ruling party’s defeat had been greatly expected and factored into markets from before. Japan’s benchmark Nikkei 225 surged 1.6 per cent in Monday morning trading to 38,527.52.