Japan's Ishiba pledges early general election in October

Japan’s new leader, Shigeru Ishiba, said he would call a national election on Oct. 27, assuming he is confirmed as Japan’s new prime minister on Tuesday, taking advantage of a positive public reaction to his victory in last week’s ruling Liberal Democratic Party leadership election.

“It is important that the new government be judged by the people as soon as possible,” Ishiba said in brief remarks to the press on Monday.

Ishiba, who won an LDP leadership election on Friday, is set to name party veterans to senior posts in his cabinet as he broadly pursues continuity in economic, monetary and foreign policy. The new administration will officially launch after Tuesday’s vote in the LDP-dominated parliament.

The role of finance minister is set to go to Katsunobu Kato, a former top government spokesman, while Ishiba will name Takeshi Iwaya, a former defense minister, as his foreign minister, public broadcaster NHK and other Japanese media reported.

Ishiba’s decision to call a quick election is a move to win a mandate for his administration while there is an uptick in voter support. A survey by the Mainichi newspaper found that 52% of the public were optimistic about the new government.

The surprise victory by Ishiba in the LDP leadership battle reflects a bid by the party to win back public trust after a fund-raising scandal and inflation woes sent the approval ratings of outgoing Prime Minister Fumio Kishida plummeting.

Ishiba has consistently been one of the most popular leadership candidates among the public. His distance from previous administrations gives him a cleaner image to project in an election.

The ruling LDP is unlikely to be ousted in any near-term national vote, given the relatively low support ratings of other parties. The main opposition party has just replaced its leader to try and revive its flagging support levels.

Tokyo stocks closed down more than 3% Monday as investors factored in the sharp rebound in the yen that followed Ishiba’s surprise win over Bank of Japan easing advocate Sanae Takaichi. A Takaichi victory was seen as likely to slow down or put the brakes on interest rate hikes by the central bank, putting pressure on the currency to weaken.

During his leadership campaign, the 67-year-old Ishiba expressed support for the BOJ’s policy normalization. In a television interview on Sunday he said it was important to keep monetary conditions accommodative, suggesting there was no rush to raise borrowing costs.

“I don’t think we should be talking about interest rates in a situation where we still can’t say for sure that deflation has been defeated,” Ishiba said during an interview with Fuji TV.

The BOJ has raised interest rates twice this year in response to inflationary pressures, but says its policy stance remains supportive of growth. Economists expect the BOJ will raise interest rates again later this year or early next year.

Ishiba has said his economic priorities are to defeat deflation and raise wages, while encouraging revitalization of Japan’s rural regions.

While Ishiba is generally viewed as cautious about fiscal policy, he has also expressed support for government spending to supplement private demand. In choosing Kato as finance minister, Ishiba will have an official largely aligned with his views. Kato is known for clear communication and has previously worked at the finance ministry.

In a Bloomberg interview last month, Kato said Japan should continue to aim for interest rates and prices to “keep moving.” He said years of stagnant prices and rates “created structural distortions.” Kato has advocated for a balanced approach to managing fiscal health and seeking growth.

Ishiba will be quickly thrust into foreign policy challenges after taking over as prime minister, including a sharp downturn in relations with China after the fatal stabbing death of a Japanese schoolboy in southern China earlier this month. Military tension is also high after a Chinese military aircraft made an unauthorized entry into Japanese airspace last month.

Early potential foreign trips include a summit meeting of the Association for Southeast Asian Nations on Oct. 9-11 and a G20 summit in Brazil on Nov. 18-19.

The choice of Iwaya as foreign minister would give Ishiba someone who is also well versed in security matters after serving as defense minister from 2018 to 2019. Another party veteran, Gen Nakatani, is expected to become defense minister having previously been in the role a decade ago.

Ishiba, Iwaya and Nakatani will have the task of providing more clarity about Ishiba’s calls for Japan to have a more equal military relationship with security treaty ally US and for the establishment of a network of regional security partnerships in Asia similar to NATO.

A self-declared “defense nerd,” Ishiba frequently raised both ideas during the LDP election campaign period.