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Nine candidates for the Japan Liberal Democratic Party presidential election attend a speech meeting in Matsue City, Shimane Prefecture, Japan, on September 20, 2024.
Japan’s heavy hitters slug it out in leadership election
Japan’s Liberal Democratic Party will elect a new president to replace Fumio Kishida on Friday, as the unpopular prime minister prepares to bow out and give his successor a fresh slate ahead of a looming general election. Three names have emerged as the leading candidates: former Defense Minister Shigeru Ishiba, Economic Minister Sanae Takaichi, and former Environment Minister Shinjiro Koizumi, the likely favorite.
What are the candidates promising? Policy-wise, the differences are marginal. Takaichi is somewhat more hawkish on China and more supportive of late PM Shinzo Abe’s economic policies than her peers. All the candidates are strong supporters of the US alliance, though Ishiba went a little further than the others by calling for an Asian version of NATO. The winner will also influence when general elections are held, with Koizumi promising to hold the vote almost immediately while Ishiba and Takaichi display more caution. But a vote must be held before Oct. 31, 2025.
It’s worth noting that, if elected, Takaichi would be the first woman to rule Japan in its modern history, and possibly the first to rule in her own name since the 8th century.
How will the vote work? The first round will be open to both elected LDP legislators and rank-and-file members, with their votes weighted equally. If no candidate secures a majority — which is likely — there will be an immediate runoff between the top two candidates, where legislators have more weight. That dynamic works against Ishiba, who is not popular among party elites. Koizumi’s more moderate image might benefit him in a runoff against the conservative Takaichi, meaning he’s a good bet if he makes it through the first round no matter who he faces in the runoff.
Whoever comes out on top, the Biden administration is hoping they’ll take a leaf from their predecessor, says Eurasia Group’s David Boling. “The White House has loved Kishida, who has made the US-Japan alliance as strong as ever, and will hope the next prime minister follows in Kishida’s footsteps,” he says.
Japanese Prime Minister Fumio Kishida attends a press conference to announce that he will not run for the Liberal Democratic Party's presidential election in September at the Prime Minister's office in Tokyo on August 14, 2024. As a result, PM Kishida will retire from Prime Minister after a new LDP president is elected in next month.
Japanese PM Kishida steps aside
Prime Minister Fumio Kishida announced early Wednesday that he will not stand for another term as leader of the Liberal Democratic Party in September, which will clear the way for a new PM. The move is a surprise, though perhaps not a shock, given Kishida’s perennially abysmal approval ratings amid struggles to balance a plummeting yen in a sluggish economy.
Kishida’s departure now will give whoever comes out on top of the LDP’s internal party hierarchy about a year’s runway before the next general elections, which must be held in October 2025. The LDP’s dominance in the Diet is legendary — it has ruled with only two brief interruptions since 1955 — but the new PM will need to use every minute of the next year to make his case to voters.
For all his unpopularity at home, Kishida won admirers in Washington with his efforts to ramp up Japanese defense spending and improve relations with other US allies like South Korea and the Philippines. We’re watching how his successor tackles security strategy, and if that endears him at all to Japanese voters.
FILE PHOTO: Indian Prime Minister Narendra Modi (2nd L) and his former Japanese counterpart Shinzo Abe (L) bow to national flags as they review an honor guard before their meeting at Abe's official residence in Tokyo, Japan November 11, 2016.
India’s rise makes Japan anxious
India is set to surpass Japan as the world's fourth-largest economy by 2025, earlier than previous forecasts. This marks Japan’s second year of decline in global GDP rankings, after falling from third to fourth place behind Germany in 2023.
According to the International Monetary Fund, India’s nominal GDP will top $4.34 trillion next year, slightly above Japan’s projected $4.31 trillion. The subcontinent’s GDP already overtook that of the United Kingdom in 2022 and grew by 7.8% in 2023.
India's economic ascent has been powered by strong domestic demand, as its population surpassed that of China last year. It experienceddouble-digit growth in its steel, cement, and automobile manufacturing sectors. India now uses its Rupee rather than the dollar for trading with 27 countries, and its 134 billion online transactions account for46% of all global digital payments.
In contrast, Japan's GDP growth lagged at 1.9% in 2023 after decades of stagnation, and the OECD projects an anemic 0.5% increase in 2024. Japan’s woes are exacerbated by its aging population, low productivity, and a stubbornly weak yen.
None of this is good news for the government of Japanese Prime Minister Fumio Kishida, amid a swirling party finance scandal and abysmal approval ratings. He’ll need to survive a leadership election in the fall for his Liberal Democratic Party, which will be looking for a leader to take them into national elections next year. With headlines like these, Kishida is expected to face defeat.Prime Minister Fumio Kishida (R) takes part in a class on generative artificial intelligence at the University of Tokyo in Japan's capital on Aug. 14, 2023.
Japan confronts the “dark side” of AI
Japan detailed a global framework for international cooperation on artificial intelligence on May 1, building off the Hiroshima Process announced at last year’s G7 summit. The framework focuses on stemming the risks that generative AI poses for global disinformation — but details are a bit lacking.
“Generative AI has the potential to be a vital tool to further enrich the world,” Prime Minister Fumio Kishida said in an address to the OECD in Paris. “[But] we must also confront the dark side of AI, such as the risk of disinformation.” Kishida said 49 countries and regions have signed on to the agreement, which includes guiding principles and a code of conduct for generative AI developers. It aims to improve transparency, risk mitigation, safety, and authentication.
Eurasia Group analyst David Boling says that the Hiroshima process is a rather incremental attempt at global regulation. “[It] shows that Japan wants to influence how countries regulate AI,” Boling said. “But its approach will be to nudge countries, not judge countries.”
It will be hard for the Hiroshima Process, he said, to “produce anything but statements of high-level principles with limited value.”
FILE PHOTO: Japanese Yen and U.S. dollar banknotes are seen in this illustration taken March 10, 2023.
How long can Japan prop up the yen?
Japan’s currency slipped to 160 yen to the dollar on Monday, its lowest rate since 1990, triggering a government intervention and threatening Prime Minister Fumio Kishida’s position.
Voters are frustrated by Japan’s high cost of living, but a change in leadership is unlikely to alleviate the pain. The heavily populated island has few fossil fuel reserves, and it must import food and energy from abroad. That means when the yen weakens, ordinary folks see their bills shoot up.
The government employed a short-term fix: selling dollar reserves and buying yen to boost it. But Eurasia Group analyst David Boling says there’s not much to be done about the root of the problem.
“The yen’s weakness is being driven by the interest rate differential between the US, which has high interest rates and high bond yields, and Japan, which is very low,” he says. “Money is moving out of Japan to capture those higher yields.”
It might be another nail in the coffin for the PM, who could be replaced at the Liberal Democratic Party’s leadership conference this September.
“Japan has to have a lower house election by October 2025, and so the members of the LDP will be thinking about electing a leader who can take them through a national contest,” says Boling.
Japan Prime Minister Fumio Kishida poses with U.S President Joe Biden as they are on the way to state dinner in Washington DC, U.S, on April 10, 2024.
Biden and Kishida bromance is meant to make Xi sweat
The White House showered Japanese Prime Minister Fumio Kishida with gifts and honors during his state visit starting Wednesday, but the friendly display is aimed just as much at Beijing as it is Tokyo.
Kishida and Biden announced an upgrade to the longstanding US-Japan defense agreement on Wednesday that will make Japan’s military more agile by appointing a local US command and organizing a joint military-industrial production committee. The two will hold a trilateral meeting with Philippine President Ferdinand Marcos Jr. on Thursday to discuss further military cooperation.
“The US-Japan security alliance – even though it’s remarkably strong – is not well integrated and unified in a way where forces can rapidly respond,” says Eurasia Group Japan director David Boling, “The long-term goal is for a combined command, with deep force integration, that can respond lickety-split to emergency contingencies.”
A Paul Simonconcert over ribeye must be a nice change of atmosphere for Kishida, who is unpopular and struggling to put a lid on party scandals at home. One of the few areas where he does relatively well with voters is foreign policy, and Kishida has continued the augmentation of Japan’s armed forces while bolstering relations with South Korea, Taiwan, and the Philippines — all potential conflict zones with China.
Tokyo’s relationship with Manila has seen the greatest strides forward, including a new agreement that could see Japanese troops deployed to the archipelago.
“On the Philippines, Japan has recognized that any contingency that escalates into a kinetic conflict is going to immediately implicate Japan,” says Eurasia Group senior analyst Jeremy Chan. After all, many of the US troops and ships that would support the Philippines (or Taiwan or South Korea) are stationed in Japan, making US bases there tempting targets for China.
We’re watching for Beijing’s reaction to Thursday’s trilateral.
Thick plates of steel for use in construction and ship building are hot-rolled by machinery at the Nippon Steel Corp. Kimitsu steel mill in Kimitsu, Japan near Tokyo February 6, 2008.
Biden slams Nippon Steel deal — but Tokyo plays it cool
US President Joe Biden on Thursday came out against Japan’s largest steel producer acquiring Pittsburgh-based US Steel, saying America must “maintain strong American steel companies powered by American steelworkers.”
Nippon Steel made an offer worth over $14 billion in December, and shortly afterward the White House indicated it would be scrutinized by the Committee on Foreign Investments in the United States. For now, the deal is still on, but CFIUS review is usually reserved for deals involving companies from potential adversaries – not from trusted allies like Japan — and presidents rarely comment before the committee finishes.
But this is 2024. Biden and presumptive GOP nominee Donald Trump are battling over blue-collar workers in key swing states like Michigan and Pennsylvania in November. Trump promised to block the deal “instantaneously” during a meeting with Teamsters earlier this year, and Biden has never been shy to flex his union bona fides.
How does Tokyo feel? Discretion seems to be the better part of valor for Prime Minister Fumio Kishida.
“Tokyo understands that in love and politics, timing is everything and that the political timing of this deal is awful for Biden,” says Eurasia Group’s Japan analyst David Boling. “That doesn’t mean that Tokyo is happy that Washington is treating an ally this way. But it’s not putting up a big fuss.”
North Korean leader Kim Jong Un attends the groundbreaking ceremony for the construction of a factory in Songchon County, North Korea, February 28, 2024.
IAEA chief backs Japan-North Korea talks
International Atomic Energy Agency head Rafael Grossi said Tuesday that the UN body supports Japan’s efforts to hold a summit with North Korea to boost engagement, even if nuclear weapons aren’t on the agenda.
Japanese Prime Minister Fumio Kishida has said he is prepared to meet with North Korean leader Kim Jong Un as he tries to bring back Japanese nationals abducted to North Korea between 1977 and 1983. Kim’s sister Kim Yo Jong, who holds considerable sway, indicated that Pyongyang would be open to talks with Japan last month.
Japan secured the release of five abductees in 2002, and of their children in 2004, but Pyongyang has since stonewalled. Of the 12 people Japan believes remain imprisoned, North Korea claims eight are dead and that four were never abducted.
Why the change of heart? Kim may be hoping to use the talks to muck up the growing closeness between Tokyo, Seoul, and Washington. The Supreme Leader has made significant rhetorical changes toward the South, renouncing the goal of reunification and referring to Seoul as “the main enemy.” Hawkish South Korean President Yoon Suk-yeol wasn’t eager for rapprochement anyway, while the Biden administration has mostly ignored Pyongyang.
Only Kishida, facing an election expected this year amid sagging approval and scandals, has any reason to talk with Kim. A breakthrough on the emotional issue of abductees — even simply obtaining proof of life or death — could goose his numbers.