To challenge China, the next US president should fix trade – Asia Times
This article was originally published by Pacific Forum. It is republished with permission.
In the September presidential debate, former President Donald Trump and current Vice President Kamala Harris had sharply contrasting views on issues ranging from energy to immigration to policy toward China and the Middle East.
Yet, both agreed that tariffs were useful for US foreign policy.
The debate started with tariffs, and the two candidates went back and forth on the likelihood that the new tariffs would cause inflation. By the end of the debate they returned to their discussion on tariffs, where they disagreed on the sectors where they thought tariffs should be imposed and on which countries should be targeted – but agreed that tariffs are useful.
Regardless of the detrimental consequence of tariffs, including inflation, the candidates emphasized the need to impose them to protect critical sectors and spur domestic manufacturing.
The debate clearly demonstrated the arrival of a new era in the United States, one in which the two parties are recalibrating the balance between national security and economics.
Biden’s trade war and Trump’s
The United States has a growing list of grievances about Beijing’s mercantilist practices. These include
- widespread market-access restrictions, from equity caps on investment to regulatory harassment;
- pervasive subsidies directed at national champions that tilt the competitive playing field against foreign firms in China and in third markets; and
- widespread forced technology transfer and intellectual property theft.
To protect domestic industries vital to national security and incentivize China to change its practices, both the Trump and Biden administrations have imposed tariffs on Chinese products.
In March 2018 President Trump announced the administration would impose a 25% tariff on imported steel and a 10% tariff on imported aluminum. Following the announcement, the Trump administration imposed several rounds of tariffs on steel, aluminum, washing machines, solar panels as well as goods specifically from China, impacting more than $380 billion worth of trade at the time of implementation and amounting to a tax increase of nearly $80 billion.
President Biden said in a 2019 speech: “President Trump may think he’s being tough on China, but all he has delivered is more pain for American farmers, manufacturers, and consumers.”
Yet, the Biden administration has largely upheld existing tariffs, with some exceptions. These include suspending certain tariffs on European Union imports, replacing tariffs with tariff-rate quotas (TRQs) on steel and aluminum from the EU and UK, as well as steel from Japan, and allowing tariffs on washing machines to expire after a two-year extension.
In May 2024, the Biden administration announced additional tariffs on $18 billion of Chinese goods, resulting in a tax increase of $3.6 billion.
President Biden’s trade policy differs from the former president’s in that he seeks to increase production and jobs in a select group of emerging high-tech industries. Additionally, he has tightened trade restrictions with China under the “Small Yard, High Fence” approach, limiting the sale of American technology to Beijing while directing federal subsidies to US manufacturers competing with Chinese manufacturers. Another key difference in President Biden’s trade policy is that his strategy relies on bringing international allies together to counter China through a mix of domestic incentives and potentially coordinated tariffs on Chinese goods.
Weighing Washington’s tariffs on Beijing
Among the reasons countries impose tariffs are:
- to protect domestic industries vital to national security,
- to incentivize foreign countries to change their practices, and
- to raise revenue.
The Trump and Biden administrations both stated they imposed tariffs for the first two reasons.
The Trump administration argued that tariffs were “imposed to encourage China to change its unfair practices” as they “threaten United States companies, workers, and farmers.”
Similarly, after the Biden administration announced tariff hikes on May 14, the White House announced tariff increases were designed “to protect American workers and American companies from China’s unfair trade practices,” including forced technology transfers and theft of intellectual property. The administration also pointed out China’s “growing overcapacity and export surges that threaten to significantly harm American workers, businesses, and communities.”
The biggest problem with the latest round of tariffs imposed in May is that it cannot resolve the problems the Biden administration sought to tackle. Rather than focusing on changing China’s forced technology transfers and protecting intellectual property rights, the tariff increases were more about boosting US industries.
Furthermore, doubts persist about whether tariffs truly benefit the US economy. By raising the cost of parts and materials, tariffs increase consumer prices, and reduce private sector output. This will eventually reduce the return to labor and capital, incentivizing Americans to work less and invest less.
There are numerous studies claiming the negative economic consequences of tariff policy. In August 2019, the Congressional Budget Office (CBO) estimated that the negative GDP effects of recent tariff increases had outweighed the positive ones and were decreasing real output by 0.3%. Meanwhile, the Tax Foundation estimated in July 2023 that the long-run effects would bring GDP down by 0.2% and total employment down by 142,000 jobs.
Another issue with the extended tariff policy is that China has evaded its impact. The US-China trade war and rising risks of investing in China prompted global companies to adopt a “China Plus One” strategy, diversifying production into ASEAN countries. These nations became attractive alternatives to replace China for their relatively young populations, free trade agreements with key players, and prime geographical locations.
However, it wasn’t just American firms relocating to Southeast AsiaChinese manufacturers also shifted operations there. Currently, Chinese firms attempt to bypass tariffs by selling components to manufacturers in ASEAN, where the final goods will not be regulated by the US. In the electric vehicle industry, Chinese companies are rapidly expanding into Southeast Asia, making it difficult to regulate them under current trade policies.
Harming allies
Successive administrations have pursued protectionism, from Trump’s steel and aluminum tariffs to Biden’s Inflation Reduction Act subsidies. Unfortunately, these protectionist policies are also hurting friendly countries. The steel and aluminum tariffs also affect the European Union and Japan, while the subsidies from the Inflation Reduction Act have created challenges for US allies trying to conduct business in the US.
In response, countries like Japan, the EU, Canada, Australia, and others have adopted their own domestic subsidies.
Getting trade policy right
If the new administration aims to achieve the stated goal of changing China’s unfair trading practices, the new president should consider reviewing its trade-distorting policies and reigniting a policy of market-driven economic integration with its allies.
To regulate China’s non-market, export-driven model of growth, the administration should work through international organizations and institutions, just as it did during the recent G7 meeting in Italy. Through channels such as the G7, the WTO and the OECD, the US could build an international coalition demanding that Beijing change direction. If those efforts should prove ineffective, the administration could authorize collective action to rein in China’s exports while simultaneously revitalizing the market economy.
Su Hyun Lee ([email protected]) is a researcher focusing on US-China relations and economic security at the Korea National Diplomatic Academy. Previously, she was a 2021-22 resident Korea Foundation fellow at the Pacific Forum.
Taiwan warns Typhoon Kong-rey ‘rapidly’ intensifying
TAIPEI: Authorities in southeastern Taiwan suspended some ferries and advised fishers to return to shore on Tuesday (Oct 29) as the island’s weather forecaster warned approaching Typhoon Kong-rey was “rapidly” intensifying. Packing maximum wind speeds of 155kmh, the storm could make landfall late Wednesday or early Thursday, the Central WeatherContinue Reading
Asean trio agree on clean air initiative
Thailand, Laos and Myanmar pledge to do more to address shared haze problems
Three Southeast Asian countries — Thailand, Laos and Myanmar — have launched a “Clear Sky Strategy 2024-2030” to solve the problems of cross-border smoke and haze pollution.
The launch ceremony took place on Tuesday at the Ministry of Foreign Affairs in Bangkok, with minister Maris Sangiampongsa joining Chalermchai Sri-on, the Minister of Natural Resources and Environment.
Also taking part were Bounkham Vorachit and Khin Maung Yi, the natural resources ministers of Laos and Myanmar, respectively.
Asean member states signed the Asean Agreement on Transboundary Haze Pollution in June 2022. In April 2023, Thailand hosted an online meeting with Laos and Myanmar to discuss how to tackle the intensifying haze situation in the three countries.
The latter meeting agreed to develop a “Clear Sky Strategy” that will serve as a work plan and a guide for sustainable cooperation.
“Clear” is an acronym for Continued Commitment, Leveraging Mechanisms, Experience Sharing, Air Quality Networks, and Response. Thailand will host a conference for all those who signed up for the agreement in Bangkok late this year.
Mr Maris said the action plan was born out of the necessity for Southeast Asia to address pollution from industry, transport, agriculture and, particularly, forest fires.
“As we approach the end of this year, when the air temperature begins to drop, we can expect PM2.5 to blow up again. Therefore, this plan addresses the issue in the region,” he said.
“It will also help us to harness cooperation with partners around the world.”
Mr Chalermchai said his ministry had stressed tackling forest fires and transboundary haze by “working closely with both (neighbouring) countries to create a concrete outcome”.
Additional 20,000 COEs could stabilise vehicle prices, but this is only possible with ERP 2.0, say analysts
WHY IS COE INJECTION NOT INCLUDED AS PART OF VEHICLE GROWTH RATE?
LTA said the move to increase COEs will be on top of the existing allowable vehicle growth rate (VGR), which remains at 0 per cent for most categories.
The VGR is the annual growth rate of the total vehicle population in Singapore, and is reviewed every three years. It is separate from the progressive introduction of the additional COEs.
Assoc Prof Theseira said that if LTA commits to a vehicle growth rate, it would not have the flexibility to decide when the COEs are added.
“Whereas this 20,000 (COE injection), they have a lot of policy flexibility,” he said.
This has its pros and cons.
“The good thing is that they can be a bit more aggressive with filling in the low supply years … But on the other hand, flexibility also means that the market will have difficulty predicting what’s going to happen,” he said.
Dr Ong said that the 20,000 COE injection can be seen as a “one-off” move ushering in the new ERP 2.0 technology.
“The 20,000 … you can treat it as a bonus number that is put in because of the implementation of (ERP 2.0) technology,” he said.
Likewise, between 1997 and 2003, 10,500 new COEs were injected upon the introduction of the current ERP system.
“By committing to an (annual) number, that means you are committing to a VGR irrespective of the reasons,” he said. “You cannot keep on increasing by (a certain percentage) every year, and then expect the conditions (in the future) to be the same as today.”
ANOTHER QUOTA INCREASE WITH DISTANCE-BASED CHARGING?
With the possibility of distance-based charging in the future, could there be another increase in COEs?
Dr Ong said that with distance-based charging, there would be an even more dynamic charging strategy that could manage congestion even more effectively than virtual gantries.
“There is a potential we can have another injection (of COEs) in the future,” he said.
However, Assoc Prof Theseira said that the current ERP 2.0 system first needs to prove itself to be effective in managing congestion before distance-based charging can be considered.
“We haven’t used (distance-based) charging before, and globally, there are almost no countries with such a system that allows this fine-tuning of road charging,” he said.
Tests have to be done when ERP 2.0 is fully adopted to see if it would be effective in managing traffic, and the system also has to gain public acceptance before it can be rolled out.
“These are things that we have to kind of evolve as we go along,” he said.
Bumper year expected for Phuket tourism
Revenue in 2024 now forecast to exceed pre-pandemic total
Tourism revenue in Phuket this year is likely to exceed the total in 2019, with almost as many visitors as in the year before the Covid pandemic, according to Thanet Tantipiriyakit, president of the Phuket Tourist Association.
“Phuket has now transformed into a destination for quality tourists, as total spending of tourists has risen above the amount recorded in 2019 despite the overall number of visitors falling slightly,” he said on Tuesday.
According to the Department of Tourism, revenue generated by visitors to the island reached 246 billion baht in the first half of this year. Spending is expected to reach 50 billion baht a month during the busiest months of November and December. Therefore, he said the full-year revenue target of 500 billion baht is achievable.
He said Phuket would also welcome more direct flights during the last quarter of this year, including inaugural flights from Astana, Kazakhstan on Sunday; Kolkata and Chennai, India on Monday; and Siem Reap, Cambodia on Tuesday. In addition to direct flights now linking Riyadh to Phuket, there will also be direct flights from Jeddah, Saudi Arabia, starting on Dec 2.
“There will be quite a lot of direct flights from many airlines to Phuket this year. It is good news for our people and local businesses,” Mr Thanet said.
He predicted that the total number of tourists this year would be between 13 million and 14 million, which would be similar to 2019. Last year Phuket welcomed about 11 million visitors.
Tourists from China are still the largest group of visitors, followed by travellers from Russia and India. The European and Australian markets have grown, but the number of tourists has not increased significantly.
Mr Thanet said he believed Phuket could reach new heights next year with international events, including the Thailand Biennale Phuket 2025, an international contemporary art festival that will run from November 2025 to April 2026.
In a related development, Phuket governor Sopon Suwannarat on Monday welcomed Masazumi Gotoda, the governor of Tokushima prefecture in Japan, along with representatives of nine companies. They discussed a memorandum of understanding on trade and tourism between the cities.
Mr Gotoda said Tokushima, in Japan’s Shikoku region, has unique natural and cultural charms, including the Iya Valley and the Awa Odori Dance Festival.
“This discussion is an important step in building good relations in terms of tourism and promoting local culture,” he said.
‘Tooth of Buddha’ set for display
Special pavilion at Sanam Luang to house relic for public viewing starting on Dec 4
The government is inviting people to pay homage to a tooth said to belong to the Lord Buddha, which will be brought to Thailand from the Lingguang Temple in Beijing from Dec 4 to Feb 14.
The 73-day event is intended to celebrate both His Majesty the King’s sixth-cycle birthday on July 28, 2024, and the 50th anniversary of Thai-Chinese diplomatic relations, government spokesman Jirayu Huangsab said on Tuesday.
Ahead of the arrival of the sacred tooth, the government is organising a ceremony and building a mandapa-pillared pavilion at Sanam Luang, where the relic will be enshrined so worshippers can pay their respects.
A rite will be held on Wednesday afternoon to mark the start of the pavilion’s construction.
Mr Jirayu said the Thai and Chinese governments had agreed to temporarily enshrine the sacred tooth relic in Bangkok as part of the celebrations of the two auspicious occasions.
Lingguang Temple, a Buddhist temple located on the eastern hillside of Mount Cuiwei, is renowned for its collection of Lord Buddha’s tooth relics.
The temple was originally built between 766 and 779 AD in the Dali period of the Tang dynasty (618–907) and was initially called Longquan Temple.
US election as an epistemological crisis – Asia Times
America is in the grip of a crisis of truth and its political and electoral systems are under duress. Losing the connection between what is true and what is fiction could have enormous consequence in the middle of this US election campaign.
Academics refer to this as an epistemological crisis, a situation where different people believe different “truths” and it becomes difficult to get a shared understanding of key facts. This, they argue, can lead to polarisation and potentially, even, an ungovernable country, based on an inability to decide on what is factually correct.
Jonathan Rauch, the journalist and author of “The Constitution of Knowledge: A Defense of Truth”, says historically disagreement about what is true has, on some occasions, led to untold killing and suffering.
Right now in the US, it’s clear that there are massive differences in what people believe is true. Polls show, for instance, that around 69% of Republicans and Republican-leaning voters think the 2020 election result was not legitimate and that Joe Biden did not win.
This division is amplified by what is happening in and around the campaigns, and the use of new and developing techniques. The Trump campaign, for instance, continues to make claims that the 2020 election was stolen.
Sharing misinformation (that is, when inaccurate content is disseminated but not with the intent to mislead) has always been part of political life, but it is now quickly amplified by social media. Spreading disinformation takes this to the next level when organizations or individuals deliberately spread lies. But the means to do so have grown more sophisticated, as demonstrated in the recent Moldovan election, where a massive Russian disinformation campaign was discovered.
History reminds us that fake news is at a premium during wartime and the world is currently experiencing two major conflicts. In both cases, the geopolitical consequences for the US are sky-high.
By spring 2024, US news media were reporting on Russia’s potential to interfere in the US election. The US administration’s position on the Ukraine war in particular matters greatly to the Kremlin, and it is no secret that a Donald Trump victory would suit Putin far better than a continuation of the Ukraine-funding Democrat alternative.
In September, US officials warned of election threats, not only from Russia but also Iran and China. Former director of the US Cyber-Security and Infrastructure Agency, Chris Krebs, stated that 2024 is “lining up to be a busy election interference season.”
What makes these multi-faceted and constantly evolving threats even harder to manage is the fact that Maga influencers are embroiled in the proceedings. This makes a unified American response against an external threat all but impossible.
One recent such example involved a company in Tennessee which was used by members of the Russian state-owned broadcaster RT (formerly Russia Today) to spread Russia-friendly content. The content-creators were paid US$10 million by RT to publish pro-Russia videos in English on a range of social media platforms. The RT employees were charged with conspiracy to commit money laundering and violating the Foreign Agent Registration Act.
This is one of many developments by the foreign interference machine as the election on November 5 nears. Other incidents include dozens of internet domains used by the Kremlin to spread disinformation on websites designed to look like news sites and to undermine support for Ukraine.
The US government’s response to these complex and boundary-blurring threats is complicated by the tension between maintaining discretion and informing the public.
Old challenges, new technology
Looking back, the 2016 presidential campaign and subsequent victory for Trump brought many firsts, some comical, others deadly serious in this post-truth arena.
The lighter side included inaccurate claims made by White House press secretary Sean Spicer about the size of Trump’s 2017 inauguration crowd. When Trump advisor Kellyanne Conway declared on television to have “alternative facts” to those reported by the media on the crowd size, her phrase entered general use.
With hindsight, such falsehoods now seem a little quaint, as the images from the day told the truth better than any script. Far more disturbingly, Russia’s Project Lakhta involved a “hacking and disinformation campaign” described in Special Counsel Robert Mueller’s 2019 Report as vast and complex in scale.
The scheme involved human and technological input and targeted politicians on the political left and right, with a view to causing maximum disruption. Just a year later, Russia interfered in the 2020 race, this time spreading falsehoods about Biden and working in Trump’s favor.
Fast forward to 2024 and we are awash with AI-created images and writing. Now any sort of lie is possible. Deep fakes, voice, image and video manipulation now mean that we literally can no longer believe our ears and eyes.
Meanwhile, back on the campaign trail in 2024, Team Trump demonstrates few qualms when dishing out alternative facts. A long-time proponent of “truthful hyperbole” the former real-estate dealer takes exaggeration to a point no longer on the scale.
From sharing an AI-generated image of Taylor Swift endorsing him (she soon backed his opponent) to claims that helicopters were not getting through with hurricane relief, the news cycle is awash with baseless content.
An inevitable outcome of this crisis and conflict over truth is voters’ confusion and disengagement, and increasing public tension, with a new poll reporting that the majority of Americans are expecting violence after the election.
Voters deserve to know whether what they know is real, but in this campaign it is increasingly clear that they don’t and the consequences of this could be stark.
Clodagh Harrington is lecturer in American Politics, University College Cork
This article is republished from The Conversation under a Creative Commons license. Read the original article.
Russian links in website blocked by Singapore government revealed in RSIS study
SINGAPORE: Links between Russian sources and an inauthentic news site blocked by the Singapore government have been found by a new study from the S Rajaratnam School of International Studies (RSIS).
Released on Friday (Oct 26), the report titled Inauthentic Local Lifestyle And News Websites And The Challenge For Media Literacy was done by Mr Benjamin Ang, who heads the RSIS’ Centre of Excellence for National Security, and RSIS associate research fellow Dymples Leong.
It showed that the domain name of Alamak.io – one of the 10 websites identified by the Ministry of Home Affairs (MHA) and the Infocomm Media Development Authority (IMDA) last week – has links to 5plus1.ru. The country-code top-level domain “.ru” is for Russian entities.
A reverse internet protocol (IP) search found that the 5plus1.ru website is associated with the same IP address as Alamak.io, the study showed.
“An online search on 5plus1.ru shows it to be linked to 5+1 Media, a Russian communications agency,” said Mr Ang and Ms Leong.
“The website states that it was founded in 2018 by graduates and teachers from the Moscow State Institute of International Relations University of the Ministry of Foreign Affairs of the Russian Federation; and headed by founder Yuri Antsiferov.”
The site lists services such as targeted advertising, news monitoring and website development, with projects in the politics, fast-moving consumer goods, energy, government and tourism sectors.
The study also revealed that images on Alamak.io were obtained from Yandex, the largest search engine in Russia.
MASQUERADING AS LOCAL SITE
Through open-source tools, the RSIS duo could not identify the owners of Alamak.io, but found that the website was created on Mar 24 last year.
It masquerades as a Singaporean site by using the colloquial expression as its domain name and carrying Singapore-related news.
“‘Alamak’ is a colloquial word used in Singapore and Malaysia, often used as an interjection or expression to describe shock, worry, dismay, and disappointment,” said Mr Ang and Ms Leong.
“The usage of the term for the website appears to be intended to evoke familiarity and knowledge of the Singapore culture. It could also be so named to target at a Singapore or regional readership or demographic audience.”
Its news articles – which cover current affairs, lifestyle, trends and contributed opinions – were repurposed from other sources, including Singapore news outlets CNA and The Straits Times.
“Investigations found that the majority of the articles published on this website were likely to have been written with Al tools,” MHA and IMDA said last week.
“This website also published commentaries on sociopolitical issues, including one that falsely alleged that Singapore had allowed other countries to conduct their biological warfare research activities here.”
The website has also carried several articles written by Russia’s ambassador to Singapore Nikolay Kudashev, on issues such as Russia-ASEAN relations and with headlines like Replacing the Rules-Based Neocolonial Framework.
Mr Ang and Ms Leong noted that “many articles on Alamak.io were seemingly generated or written by artificial intelligence”, with a few articles deemed by AI detection software to have a probability of 98 per cent AI-generated text.
“This strongly suggests that the articles were AI-generated and raises questions about the lack of articles published by human authors on the website,” they said.
Study finds Russian link to website blocked by Singapore government
SINGAPORE: Links between Russian sources and an inauthentic news site blocked by the Singapore government have been found by a new study from the S Rajaratnam School of International Studies (RSIS).
Released on Friday (Oct 25), the report titled Inauthentic Local Lifestyle And News Websites And The Challenge For Media Literacy was done by Mr Benjamin Ang, who heads the RSIS’ Centre of Excellence for National Security, and RSIS associate research fellow Dymples Leong.
It showed that the domain name of Alamak.io – one of the 10 websites identified by the Ministry of Home Affairs (MHA) and the Infocomm Media Development Authority (IMDA) last week – has links to 5plus1.ru. The country-code top-level domain “.ru” is for Russian entities.
A reverse internet protocol (IP) search found that the 5plus1.ru website is associated with the same IP address as Alamak.io, the study showed.
“An online search on 5plus1.ru shows it to be linked to 5+1 Media, a Russian communications agency,” said Mr Ang and Ms Leong.
“The website states that it was founded in 2018 by graduates and teachers from the Moscow State Institute of International Relations University of the Ministry of Foreign Affairs of the Russian Federation; and headed by founder Yuri Antsiferov.”
The site lists services such as targeted advertising, news monitoring and website development, with projects in the politics, fast-moving consumer goods, energy, government and tourism sectors.
The study also revealed that images on Alamak.io were obtained from Yandex, the largest search engine in Russia.
MASQUERADING AS LOCAL SITE
Through open-source tools, the RSIS duo could not identify the owners of Alamak.io, but found that the website was created on Mar 24 last year.
It masquerades as a Singaporean site by using the colloquial expression as its domain name and carrying Singapore-related news.
“‘Alamak’ is a colloquial word used in Singapore and Malaysia, often used as an interjection or expression to describe shock, worry, dismay, and disappointment,” said Mr Ang and Ms Leong.
“The usage of the term for the website appears to be intended to evoke familiarity and knowledge of the Singapore culture. It could also be so named to target at a Singapore or regional readership or demographic audience.”
Its news articles – which cover current affairs, lifestyle, trends and contributed opinions – were repurposed from other sources, including Singapore news outlets CNA and The Straits Times.
“Investigations found that the majority of the articles published on this website were likely to have been written with Al tools,” MHA and IMDA said last week.
“This website also published commentaries on sociopolitical issues, including one that falsely alleged that Singapore had allowed other countries to conduct their biological warfare research activities here.”
The website has also carried several articles written by Russia’s ambassador to Singapore Nikolay Kudashev, on issues such as Russia-ASEAN relations and with headlines like Replacing the Rules-Based Neocolonial Framework.
Mr Ang and Ms Leong noted that “many articles on Alamak.io were seemingly generated or written by artificial intelligence”, with a few articles deemed by AI detection software to have a probability of 98 per cent AI-generated text.
“This strongly suggests that the articles were AI-generated and raises questions about the lack of articles published by human authors on the website,” they said.
Ishiba’s election setback raises red investor flags over Japan – Asia Times
Japan’s ruling Liberal Democratic Party (LDP) has suffered a substantial political setback, leaving Prime Minister Shigeru Ishiba with a fractured mandate after failing to secure a majority in the lower house election on October 27.
For global investors, this outcome adds yet another layer of uncertainty in a world already grappling with economic volatility, inflationary pressures, geopolitical tensions and a highly uncertain US election.
Although Ishiba will likely manage to pull together some form of coalition government, the fragility of such an arrangement casts doubt on Japan’s ability to maintain a coherent economic policy.
Investors will be particularly cautious as a weakened government often struggles to implement long-term reforms, let alone respond decisively to sudden economic shifts.
The question now is not just whether Ishiba can secure enough support to govern but also whether he can deliver the stability and consistency that investors need to feel confident in Japan’s economic trajectory.
Without a clear majority, the LDP’s agenda for economic reform will be at the mercy of coalition partners with potentially divergent priorities.
For investors, this spells potential paralysis on issues like tax reform, trade policy and fiscal stimulus—all critical levers that affect business confidence and capital flows.
The country’s aging population and sluggish growth have long posed structural challenges and any sign of policy gridlock could deter foreign investment at a time when Japan needs it most.
The post-election environment likely means more negotiation, more compromise and less ability for Ishiba to push through the bold initiatives that would attract more foreign capital.
Market participants will be watching closely to see whether the coalition, if and when formed, signals a willingness to tackle these deep-seated issues or merely focuses on short-term political survival.
In either scenario, Ishiba’s government will need to work hard to reassure both domestic and international markets that Japan remains committed to economic stability and growth.
Japan’s hot geopolitical environment, with tensions on the rise with China, adds another layer of urgency. Rising regional tensions—particularly with China—place the country in a critical position within global supply chains.
Ishiba’s ability to manage these relations while maintaining domestic political harmony will be closely scrutinized by investors, who are weighing the potential for and implications of a more unstable Asia-Pacific region.
A weakened Japanese government unable to present a unified front may find itself vulnerable and weak in diplomatic negotiations with key actors, complicating potential trade and investment deals.
As Japan faces 30 days of coalition negotiations, markets will rightly be on high alert. Ishiba’s capacity to negotiate and his willingness to compromise will set the tone for Japan’s economic outlook.
If he emerges from the process with a reasonably stable coalition, it may be enough to restore investor confidence.
If the resulting government appears highly fragmented or indecisive, investors may start pricing in increased risk premiums, affecting the yen, equity markets and Japan’s credit ratings.