Sure A Not

As the case approves the ancillary budget, the Takaichi government is being questioned about how fiscal policy is managed.

However, Prime Minister Sanae Takaichi continues to face concerns about what she discussed with US President Donald Trump, notwithstanding her administration’s denials of a document that suggested the US senator was less than friendly of Takaichi in Japan’s worsening debate with China.

But, Takaichi won a significant political victory when three legislators announced they would join the Liberal Democratic Party in a conference, giving the government a plain bulk in the chamber.

Ultimately, both the government and the LDP panels are beginning to consider foreign policy options before the government starts drafting a fundamental policy in January.

Governmental tension

On Friday, November 28, the Takaichi cabinet approved its FY2025 optional resources, allowing the Diet to receive the JPY18.3 trillion resources. The majority of the extra budget will be made up of deficit bonds, which total roughly JPY8.2 trillion, compared to JPY11 trillion. As the Takaichi government has repeatedly stressed, the total amount of friendship release for FY2025 will also likely be lower than the JPY42.14 trillion issued in FY2024.

Takaichi is rushing to the center of a thorny controversy over the government’s money, though. The new optional funds, according to what the government anticipates, will result in a JPY3 trillion gap instead of the JPY3.6 trillion glut that the Cabinet Office had anticipated for FY2026 as late as August, with the risk that it will grow even higher.

Takaichi, who has made little mystery of her dedication to apply fiscal policy to help her perception of a more self-reliant, resilient and carefully automatic Japan, faces&nbsp, competing pressures that have already shaped perceptions of her government and will form her government’s options going ahead.

On the one hand, financial markets have been eliciting unmistakable warnings about her government’s actions, raising long-term bond yields to their highest levels in well over a decade and causing a protracted selloff of the yen. ( The finance ministry announced in January that it would issue more short-term loans in an effort to stop long-term spikes. )

Meanwhile, she is also facing&nbsp, increasingly vocal opposition from the LDP’s fiscal hawks, led by Taro Aso, who may be relatively sidelined ( particularly on the LDP tax commission ) but who are unlikely to remain silent. ( Aso&nbsp, met&nbsp, and Takaichi met before the cabinet approved the budget, which was reportedly made the suggestion that the government’s stimulus package is too large. )

On the other hand, Takaichi not only has her priorities to fund and an ideological bias toward greater deficit spending, but also, as she tries to win over Ishin no Kai, win over the Democratic Party for the People ( DPFP ) and entice younger voters to support the LDP, her political incentives are likely to favor fiscal expansion.

The financial establishment may lament her choices – as&nbsp, Nikkei&nbsp, wrote&nbsp, in an editorial,” Diluting real debt through an’ inflation tax ‘ borne broadly by the public while shifting the burden to future generations hardly qualifies as’ responsible'” – but she may have more to gain politically from pursuing “responsible fiscal expansion” than from heeding the warnings of fiscal hawks.

Her government is obviously aware that it needs to let the markets know that it is not putting all of its restrictions to the wind, but so far it does not appear to be doing so. For the moment, it seems as though her strategy will be to spend now and reassure the markets later.

Trump, Takaichi and Taiwan

Following his call with Chinese President Xi Jinping, Takaichi and US President Donald Trump exchanged specific details.

The Takaichi government has attempted to downplay the notion that there is a gap between the US and Japan on China following the  Wall Street Journal&nbsp  report on Thursday that Trump “wrote” a” subtle” but “worrying” message to Takaichi asking her to” not provoke” China but not tell her to back down.

Chief Cabinet Secretary Minoru Kihara promptly&nbsp, denied&nbsp, that Trump had said anything like what was reported by the&nbsp, Journal, though the government has not demanded a retraction.

Nikkan Gendai alludes to some government sources suggesting that the call was at least as bad for Takaichi as the&nbsp, Journal&nbsp suggested, if not worse. The government’s response may be more about saving face, especially with domestic audiences.

Whatever was said during the call, there is still a chance that the Trump administration will prioritize the interests of Japan, Taiwan, and the rest of the region in favor of its glaring desire for a modus vivendi with China.

Questions about a” G2″ arrangement between the US and China – a phrase that has vexed Japanese officials for years– will persist. Foreign Minister Toshimitsu Motegi ducked&nbsp in a question from an opposition lawmaker about Trump’s use of the phrase when he met with Xi in South Korea during parliamentary questioning on Friday.

Government quietly regains a majority in the form of a majority.

On 28 November, the three members of the Reform Club in the House of Representatives – an Ishin no Kai splinter –&nbsp, announced&nbsp, that they would dissolve their caucus and formally caucus with the LDP instead. In the process, the LDP now has a bare majority of seats in the 465-seat house, which is a result of the lower house’s seat total increasing to 199. With Ishin no Kai’s 34 seats, the governing parties now have 233 seats.

This may not matter very much in practice. A one-seat majority is still a majority that requires a lot of work to ensure that ruling party lawmakers are disciplined ( and gives a considerable amount of leverage to any legislator or group of legislators that wants to extract concessions from the government ). And the ruling parties still need to acquiesce to a majority in the upper house by six seats, which would indicate that they must still enlist the support of one or more opposition parties to pass legislation through both houses.

However, it is yet another indication that Takaichi is in a better position to stabilize the political system than Ishiba was given high approval ratings and legislative control. It could also&nbsp, reduce&nbsp, the temptation to call a snap election, and will make it even more difficult for the opposition – which has already struggled to unite behind a no-confidence motion – to use the threat of a no-confidence motion for leverage.

Debates on foreign policy for population growth start.

This week, the advisory council of the Takaichi government to “orderly co-exist” with foreigners and the LDP’s foreign population policy project teams began their work on the main policy initiatives to manage Japan’s growing foreign population ahead of the government’s drafting of a basic policy in January.

The government panel, full of academic specialists on population issues, is taking a broad view, &nbsp, exploring&nbsp, ways to reassure the public that the government will work to minimize law-breaking and other disturbances by foreign nationals in the name of public order. Meanwhile, the LDP’s project teams are looking, looking, and at their best when they are.

• changes to visa regulations,
• national security, with a particular focus on real estate rules, and
• access to the welfare of the public.

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Yoshihiko Noda, speaking to the press on November 29, again&nbsp, called&nbsp, for his Constitutional Democratic Party ( CDP ) and Komeito to&nbsp, forge an alliance of moderates.
• The Cabinet Office survey on public attitudes toward Japan’s foreign policy revealed that the country’s favorable views of the United States had dropped by fourteen percentage points to 70.8 %, which is the second-lowest figure since the survey was first asked in 1998.
• The government will use the additional budget to support investment in the United States by using resources from the Japan Bank for International Cooperation ( JBIC ) and Nippon Export and Investment Insurance ( NEXI ) to their advantage.
• Another Ishin no Kai lawmaker is facing&nbsp, allegations&nbsp, that he&nbsp, violated the political funds control law.
• The Ministry of Internal Affairs released the 2024 political financial account settlements, revealing that while the majority of Sanseito’s income was largely based on public funding, with more coming from membership dues and individual donations, the majority of the money was made from public funding. Funds raised at fundraising events, which are the source of the LDP’s slush fund scandal, fell by almost 50 % year over year.
• Is a careless remark from Takaichi about&nbsp, campaign finance reform&nbsp, during this week’s leaders ‘ debate becoming an&nbsp, issue&nbsp, for the prime minister?
• A , survey , by , Shukan Bunshun , and relative dependence of major Japanese companies on Chinese revenue.

Longtime Japan politics and policymaking analyst&nbsp, Tobias Harris&nbsp, heads &nbsp, Japan Foresight LLC. This article was originally published on his website, the Observing Japan Substack newsletter, and is republished with permission. Subscribers can sign up for newsletters here.

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