Here are the developments in Japanese national politics since the weekend:
The Takaichi government is pushing ahead with a supplementary budget, but faces some choices.
The new LDP study group aimed at supporting Prime Minister Takaichi Sanae attracted most of the party’s lawmakers, suggesting limited utility as a base for the prime minister.
Leaders of the LDP’s defense panel support not including a strong budget target in its recommendations to the government.
Takaichi’s picks for the extra budget
The Takaichi government is now determined to introduce a supplementary budget in the Diet in June, before the end of the legislative session in July.
The government is determined to limit the size and focus of the budget. She has TOLD that its aim will be a JPY 3 trillion budget aimed at building up government reserves while it continues to provide fuel subsidies and PLANs to spend 500 billion JPY on utility subsidies during the summer.
However, Ishin no Kai, the small ruling party, and opposition parties want the government to provide an economic stimulus amid signs that consumer sentiment is softening.
Despite Prime Minister Takaichi’s commitment to “responsible fiscal expansion”—or because of it, to the extent that she wants to put fiscal resources toward her strategic priorities rather than short-term stimulus—the government can point to rising bond yields as an argument against those demands.
At the same time, Takaichi’s Friday meeting with Bank of Japan (BOJ) Governor Kazuo Ueda, her first one-on-one meeting with Ueda since February, could indicate greater tolerance from the prime minister for another BOJ rate hike – in an effort to curb inflation that could rise despite the April data. showed inflation falls below the BOJ’s 2% inflation target.
In April, inflation appears to have been curbed both by fuel subsidies – subsidies that top officials of the Liberal Democratic Party (LDP) claim. arguing cannot continue at an “unrealistic and unsustainable” level – and the new subsidies introduced for secondary education and school lunches.
Ultimately, the prime minister must now strike a balance between curbing inflation and supporting demand and managing the economic shock in the immediate term versus pursuing her longer-term ambitions — all while avoiding steps that could push bond yields higher.
Takaichi will show considering a supplementary budget on Monday, May 25.
The Takaichi study group attracts the majority of the LDP
The first meeting of the National Power Research Association, the LDP study group organized by Taro Aso and other senior LDP lawmakers to promote Takaichi’s policy agenda, was held on Thursday, May 21. It featured a speech by US Ambassador George Glass.
While there has been much speculation about Aso’s intentions to push for the group’s formation, the fact that 347 LDP lawmakers attended the first meeting somewhat dampened the effect.
After all, the 347 lawmakers are more than 80% of the party’s lawmakers, with some of its opponents within the party like former prime minister Fumio Kishida also present.
It seems that only its most persistent opponents such as former Prime Minister Shigeru Ishiba and his ally Seiichiro Murakami – who RECALLING meeting similar to the wartime “Imperial Dominion Aid Society” (into which the pre-war parties were dissolved) – stayed away.
But enthusiasm at the meeting was “not high,” with one participant describing it’s more like a formal party gathering of legislators
The strong turnout suggests that LDP lawmakers do not want to be seen as too distant from the still-popular prime minister. But a club with almost the entire party among its members is not even a committed movement united behind the prime minister.
For the immediate term, Takaichi’s dinner meeting Friday night’s meeting with leaders of the LDP’s Upper House caucus may be more telling of her ability to manage the party, as it suggests she has taken their anger at ignoring their advice seriously and is trying to mend fences.
Working closely with LDP upper house leaders, who will have to work with opposition parties to draft the chamber’s agenda, will only be part of the job as long as the LDP lacks a majority in the House of Councillors.
Leaders of the PLD defense panel do not approve any budget targets
LDP national security panel leadership prepares recommendations for Takaichi government’s review of three national security documents ADOPTED a draft of the party’s proposal that did not include a concrete target for increasing defense spending.
The draft LDP refers to “providing a budget for the transformation of defense capabilities within five years”.
The omission of a concrete target for the next medium-term defense plan from the draft indicates an undercurrent of concern within the LDP that promising higher defense spending without providing a strong fiscal base for larger defense budgets could have serious consequences.
Whether the Takaichi government sticks to the formula or not, it suggests that, as the LDP learned when the Kishida government set a target of 2% of GDP in 2022, the political economy of defense spending is sensitive and divisive, and may be even greater now that interest rates have risen.
Apart from the defense spending question, the LDP draft focus much in developing and deploying unmanned vehicles and strengthening Japan’s defense industrial base.
The LDP panel as a whole will debate the draft on May 25 before final submission to the government in June.
This article is reprinted with permission from Tobias Harris’ newsletter Observing Japan.
