Japan’s Election Race Begins With Dissolution of Parliament

(Bloomberg) -- A bid by new Japanese Prime Minister Shigeru Ishiba to turn his personal popularity into a fresh mandate for the scandal-plagued Liberal Democratic Party began with the dissolution of the lower house of parliament on Wednesday ahead of a national election later this month.

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While it’s unlikely the LDP will lose control of the more powerful lower house of parliament in the Oct. 27 vote, the surprise emergence of Ishiba as prime minister is a bid by the party to shore up support by turning to a leader with a cleaner image.

“This dissolution is a step to recreate Japan,” Ishiba said later in the day at a press conference.

Early Wednesday, party officials said 12 LDP lawmakers most deeply implicated in a kickback scandal wouldn’t be eligible to represent the party in the election, an effort by Ishiba to address lingering public concern over the affair. Ishiba opted not to bar other LDP parliamentarians involved in the scandal, prompting criticism from opposition parties that he isn’t willing to overhaul the party.

“We made decisions about whether we can or can’t officially back lawmakers through vigorous debate,” Ishiba said.

Recent opinion polls show around 50% public support for Ishiba’s administration, low by historical standards for a new leader but up sharply from ratings of around 20% for the government of former Prime Minister Fumio Kishida before he made clear his intention to stand down in the summer.

The LDP currently holds 258 seats in the lower house, well above the 233 seats needed for a majority. Its coalition partner, Komeito, has 32 seats. Barring a dramatic reversal at the ballot box the LDP is likely to maintain its grip on power, although a steep fall in its representation would increase the pressure on Ishiba ahead of an upper house election next year.

During his press conference late Wednesday, Ishiba said he’ll seek a majority win with Komeito, suggesting he’s preparing for some losses.

Ishiba has pledged continuity with the Kishida administration’s economic focus on decisively ending deflation and raising wages. Earlier this month, the prime minister instructed his cabinet to draw up a package of economic measures aimed at reducing the impact of high prices and supporting growth, including cash handouts for low-income households.

However, some mixed messages on economic policy have given Ishiba an uneven start and triggered financial market volatility.

After expressing support for the Bank of Japan’s rate hike path before becoming leader, Ishiba then appeared to send the reverse message on his first full day in office. He later backtracked, stating that he meant to show he’s fully aligned with the BOJ. Ishiba has also dialed back a remark about raising the capital gains tax on financial income for wealthy individuals.

“All of this makes market players publicly wonder whether Ishiba will stick to these economic stances once the election is over. No one really knows,” wrote Richard Katz, an author and journalist, on Japan Economy Watch, a blog.

The LDP’s primary challenge in the election will come from the Constitutional Democratic Party of Japan, which is the second largest party in the lower house with 99 seats. The CDPJ also recently changed its leader and has focused on the LDP’s party funding scandal in its early pitches to voters ahead of the election.

Speaking in a party leaders’ debate Wednesday, CDPJ head Yoshihiko Noda criticized Ishiba for continuing to back some LDP lawmakers despite them admitting their part in the kickback scandal. “This is impossible to accept,” he said. Ishiba countered that he’ll leave it to voters to decide.

The CDPJ has pledged more economic redistribution to those on low incomes such as the elderly and students, and to shore up the middle class.

After holding a press conference later Wednesday, Ishiba is set to travel to Laos to attend a meeting of ASEAN, where he is expected to also have meetings with leaders from South Korea and China.

--With assistance from Tomoko Hatakeyama.

(Updates with comments from Ishiba.)

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