1. The link to ‘The World Factbook’ profile of Japan is here. (Source: cia.gov)
2. Japan votes (today):
Japan holds Upper House elections every three years; this cycle will decide who holds 124 of 248 seats. (Click here for a more detailed primer on how Upper House elections work). Voting takes place from 7 a.m. to 8 p.m. Sunday, with exit polls released minutes after it ends. Official results will come early Monday. (Sources: nytimes.com, www3.nhk.or.jp. Ed. Note: 8pm in Japan is 7am EDT.)
3. Financial Times:
Japan’s ruling bloc led by the Liberal Democratic party is in danger of losing its majority in both houses of parliament for the first time in 15 years as a backlash led by first-time voters, inflation-strained households and savvy social media campaigners hits traditional politics.
While the election will be fought over just half the seats in parliament’s less influential upper house, prime minister Shigeru Ishiba’s political future is at stake, analysts say.
A loss of a majority for the ruling coalition would put pressure on Ishiba — even prompting calls for his resignation — and prove a distraction from trade talks with the US and a tariff threat described by the prime minister as a “national crisis”.
Ishiba has failed to reach a deal with the US after months of negotiations and is unpopular for his party’s handling of the Japanese economy. After years of deflation, prices are rising and real incomes declining, boosting the ability of right-wing anti-foreigner parties to make populist appeals to voters. (Source: ft.com)
4. The New York Times:
Japan faces four big problems: difficult trade talks with Washington, a more assertive China, an aging population and the sharpest price increases in 30 years. Of these, the last has been the single biggest issue with voters, whose incomes have not kept pace. A hot-button issue has been the cost of rice, a vital staple that has doubled in price because of poor harvests and government policies.
There is also a growing discontent with the United States, which no longer looks like the reliable partner it once was. Many Japanese have felt betrayed by the Trump administration’s threat to impose a 25 percent tariff on all of their country’s exports to the United States on Aug. 1, unless Tokyo opens up its already troubled rice market and agrees to buy more U.S.-made cars. (Source: nytimes.com)
5. Nikkei Asia:
Japan's looming upper house election is shaping up as a referendum on whether the country should cut its consumption tax, as households continue to struggle with a cost-of-living crisis.
A clear dividing line has been drawn between the ruling coalition of the Liberal Democratic Party and Komeito, which is advocating for one-time cash handouts, and opposition parties calling for varying degrees of cuts to the consumption levy -- which is a form of value-added tax (VAT) -- on purchases of goods and services.
Estimated costs of the policy proposals range from 3.5 trillion yen ($24 billion) to over 20 trillion yen. With no other national elections scheduled for the next three years, this one looks set to shape Japan's fiscal policy for the foreseeable future.
Some analysts have been quick to warn of the implications that expansionary fiscal remedies will have on financial markets and Japan's economy, given the country's substantial government debt and budget deficits.
There is a growing concern globally about "deteriorating fiscal conditions," economists at Nomura said in a recent note. "Under these circumstances, if opposition parties advocating expansionary fiscal policy were to gain seats, this could trigger a market reaction in the form of yen selloffs amid concerns about declining political stability."
This, they added, would "likely result in upward pressure on prices in Japan, mainly via higher import prices." (Source: asia.nikkei.com)
6. The hottest hot-button issue:
Many voters have turned to Sanseito and other nationalist parties that have fed on anger about the status quo. To varying degrees, these parties rail against similar issues: the price of staples like rice rising while wages have remained flat; a tax burden that forces young people to pay for Japan’s aging population; and an overreliance on the United States, an ally whose threats of tariffs have stirred feelings of betrayal.
The hottest of the hot-button issues, though, has been a rapid increase in foreign residents, whose number reached 3.8 million last year. While this is still only 3 percent of Japan’s population of 124 million, the number has risen by a third in three years as workers from other parts of Asia have come to fill jobs left vacant by the decline in the country’s working-age population.
On social media, immigrants have been blamed for disrupting Japan’s prized social order, and for a host of misdeeds like not paying hospital bills and driving on the wrong side of the road. While police statistics show that non-Japanese commit crimes at roughly the same rate as Japanese nationals, populist candidates and supporters have seized on crimes by foreigners to argue that immigration should be restricted. (Sources: nytimes.com, japantimes.com)
7. Financial Times:
Yields on 10-year Japanese government debt have hit their highest level since the 2008 financial crisis as markets begin to price in the risk of populist campaign pledges and political uncertainty ahead of an election.
The 10-year yield, which moves inversely to prices, rose as much as 0.02 percentage points on Tuesday to 1.59 per cent as an increasing number of polls suggested the ruling Liberal Democratic party would suffer heavy losses in Sunday’s upper-house parliamentary elections. Yields settled later in the day at 1.58 per cent.
“The market sold off on the expectation the LDP is going to lose its majority in the upper house,” said Wei Li, head of multi-asset investment at BNP Paribas in China.
Traders are increasingly concerned that Sunday’s vote could force the LDP to make concessions to smaller parties whose popularity has been built on pledges that would strain the finances of a country with the developed world’s highest level of public indebtedness. (Source: ft.com)
8. Bloomberg:
Currency strategists are preparing for more weakness in the yen if Japanese Prime Minister Shigeru Ishiba’s ruling bloc loses its majority in the upcoming upper house election.
Several local Japanese media polls suggest the Liberal Democratic Party-led coalition may fail to win enough seats to retain a majority. But whatever the election outcome, more government spending seems likely. To entice voters, the LDP is dangling cash handouts, while opposition parties are pushing an expensive plan to cut the sales tax.
Fiscal concerns have already driven up Japan’s bond yields to multi-year highs. But election anxiety is also weighing on the yen, which has fallen to its weakest level since April this week. In another sign of potential pressure on the currency, short-dated options bets turned net bearish on the yen versus the dollar this week for the first time in almost a year. (Source: bloomberg.com)
9. The Economist:
Japanese politics are moving into a messy new era. The long-dominant LDP faces many threats, with big implications for the country’s future. Upper House elections taking place on July 20th are the next test of how well the party is adjusting to this new era. In a sign that the outside world is already recalibrating, on July 14th long-term government bonds sold off sharply due in part to worries about the direction of fiscal policy…..
Newer, smaller parties are offering clearer messages, even if their ideas are often impractical. Several outfits now threaten the LDP from the right. The Do-it-Yourself Party (Sanseito), a five-year-old far-right populist party, has made inroads with an anti-immigrant “Japanese First” message. The Japan Innovation Party (Ishin) has built up a strong base around Osaka, Japan’s second city. There are left-wing upstarts, too. Reiwa Shinsengumi, a six-year-old populist party, is trying to steal voters from the staid Japanese Communist Party and the Constitutional Democratic Party (CDP), the centre-left successor to the DPJ. It promises, among other things, to abolish the consumption tax.
The most successful small party is the Democratic Party for the People (DPFP). It combines technocratic centrism with populist flair. It appeals to voters from both sides of the political spectrum. The party quadrupled its seats in the Lower House last October, to 28. The LDP, which has 196 seats, has been forced to co-operate with it to pass many bills. Tamaki Yuichiro, its leader, hopes his party will one day prop up a coalition government; he wants to use that leverage to become prime minister. He is laser-focused on winning over younger and working-age Japanese. He has offered giveaways intended to increase their take-home pay. The party leads the LDP among under-40 voters in one recent poll.
These challengers are all making better use of new media. Until lately social media’s influence on politics had been growing more slowly in Japan than in other rich countries, perhaps because voters there are older. Yet now the revolution looks well under way. Nearly 75% of Japanese over 70 say they trust NHK, the national broadcaster. Fewer than 40% of 20-somethings do. Mr Tamaki and other upstarts are doing better on the sites that younger people flock to. The DPFP boasts nearly twice as many YouTube subscribers as the ruling party.
People think the LDP are “old-fashioned, traditional, out of touch with new trends”, laments one of its younger members. The party’s greying leaders are more at ease in the smoke-filled backrooms of Tokyo’s ryotei (clubby traditional restaurants) than on the algorithmic byways of the internet. “It’s a big threat for the LDP, and the leadership doesn’t realize the size of the threat they are facing,” says Hosoya Yuichi of Keio University in Tokyo. A month after it launched, the LDP’s TikTok channel had fewer than 3,000 followers.
Though the LDP is certainly down, it is clearly a long way from out. Its members include talented young politicians waiting for a chance to shine, notes Toshikawa Takao of Insideline, a newsletter. If the party can make one of them prime minister, that might do wonders for its brand. Compared with any of its challengers, the LDP has stronger local networks, deeper pockets and closer ties with the country’s powerful bureaucracy. The LDP’s support has fallen from above 40% in 2022 to below 30% now. But none of its rivals cracks 10%. (Sources: economist.com, japantimes.com, italics mine)
10. The Economist:
The image Tamaki Yuichiro wants to convey is of upward mobility. His campaign poster shows him grinning against a vivid orange backdrop, arms extended and fingers pointing skyward. The slogan beneath is hardly revolutionary: “Increase take-home pay.” But Mr Tamaki has turned this into a rallying-cry among younger voters.
The 56-year-old leader of the Democratic Party For the People (DPFP), an opposition upstart, is disrupting Japan’s ossified politics. In last year’s lower-house election, Mr Tamaki’s party quadrupled its number of seats to become the fourth-largest force. The ruling Liberal Democratic Party (LDP) was left leading a minority government, and needing Mr Tamaki’s help to pass legislation. On July 20th voters will elect a new upper house, where the LDP and its junior coalition partner, Komeito, are at risk of losing their majority. That would lead to a shake-up. Mr Tamaki hopes to become prime minister at the head of a new coalition. (Source: economist.com)
Ed. Note: We will post “exit poll” results later this morning.