Japan’s ruling LDP plans to formalize a coalition agreement on Monday, according to its new partner, setting the stage for Sanae Takaichi to potentially become Japan’s first female prime minister, driving the Nikkei to a record high.
The announcement by the Japan Innovation Party (JIP) came just before the lower house’s vote on Takaichi’s appointment as the fifth prime minister in five years.
“After thoughtful consideration, I called (LDP) president Takaichi this morning to finalize a coalition agreement,” said Hirofumi Yoshimura, JIP co-head.
“We will officially sign the agreement at 6:00 pm,” he informed reporters.
Takaichi, 64, regarded as a China hawk and a right-leaning traditionalist within the LDP, recently secured the party leadership.
Her path to premiership was interrupted by the LDP’s coalition breakdown with Komeito after 26 years.
Komeito criticized the LDP for not tightening party funding regulations after a damaging scandal.
The party was also disturbed by Takaichi’s past rhetoric on China and her visits to a controversial Tokyo shrine.
– Likely to win –
Takaichi’s appointment was urgent.
US President Donald Trump is scheduled to visit at month’s end en route to the APEC summit in South Korea.
Unresolved trade deal details between Washington and Tokyo remain, with Trump urging Japan to stop Russian energy imports and boost defense spending.
The LDP’s coalition with JIP is two seats short of a lower house majority for Takaichi’s appointment.
However, Takaichi is still favored to win since she only needs more votes than the other candidate in a run-off.
The coalition news boosted the Nikkei 225 index by over three percent to a record above 49,000 points.
Yutaka Miura, a Mizuho Securities analyst, noted that investor optimism was fueled by “proactive fiscal policies” anticipated from Takaichi, Bloomberg reported.
Takaichi has supported aggressive monetary easing and increased government spending, akin to “Abenomics,” inspired by her mentor, former premier Shinzo Abe.
– Minority government –
During her campaign, Takaichi softened her stance on both economic and China-related issues.
With a minority in both parliament houses, the coalition will need support from other parties to pass legislation.
The JIP aims to eliminate the consumption tax on food and ban corporate and organizational donations, Kyodo News reported.
The party also advocates for reducing the number of lawmakers and will reportedly not occupy ministerial posts in Takaichi’s cabinet.
In addition to managing Trump, Takaichi faces challenges such as addressing Japan’s declining population and stagnant economy.
She will also need to reverse the declining support for the LDP, which has largely governed Japan since 1955.
Smaller parties gaining traction include the populist Sanseito, which criticizes immigration despite foreign residents comprising only about three percent of the population.
