Kishida Critics Take Advantage of Yen Weakness in Japan’s Upper House Elections | Business and Economy

The Japanese prime minister defends ultra-loose monetary policy during the campaign for the July 10 elections.

Japan’s upper house election campaign kicked off with Prime Minister Fumio Kishida battling criticism of the ultra-loose monetary policy he continues to support despite concerns it is accelerating price rises.

Kishida defended the government’s approach during a televised debate Tuesday with eight other party leaders that marked the start of the campaign for the July 10 election. Kenta Izumi, head of the largest opposition Constitutional Democratic Party, used the term “Kishida inflation” in a bid to capitalize on recent price gains that have eroded the prime minister’s relatively strong support.

“Current inflation is caused by fuel price hikes and yen weakness,” Izumi said in Tokyo. “It is difficult to stop fuel price increases, but the question is whether yen weakness is going to be neglected.”

In response, Kishida, a former banker, said the current policy should be maintained, while reiterating a warning about the damage higher interest rates could do to small businesses and homeowners. So far, Kishida has supported Bank of Japan Governor Haruhiko Kuroda’s policies, including in a statement on Monday.

“Monetary policy has a powerful effect on exchange rates,” Kishida said at the debate. “But it also affects small, medium and micro businesses and mortgage interest rates. In other words, it has a powerful effect on the entire economy.”

Inflation anxiety has injected some uncertainty into an election that the ruling Liberal Democratic Party seemed certain to win by a wide margin just weeks ago. While the upper house has less power, a convincing victory would allow Kishida to postpone another election test for up to three years and avoid the “revolving door” that many of his predecessors have passed through.

Japan’s fractured and unpopular opposition has long struggled to capitalize on the LDP’s struggles. A poll conducted by the Nikkei newspaper from June 17-19 found that 43% of respondents planned to vote for the LDP, followed by 10% for the Japan Innovation Party and 8% for the CDP. LDP coalition partner Komeito got 6%.

Kishida is also ready to fight for defense policy after Russia’s war in Ukraine intensified concerns in Japan that China could seize similar territory in Asia. In response, the once moderate Kishida pledged to substantially strengthen the country’s defenses, with a proportional increase in spending.

The LDP’s political platform calls for the North Atlantic Treaty Organization’s target of 2% of gross domestic product to be taken into account and for the country to gain the ability to respond to a missile attack. Still, Kishida said Tuesday that the government had not decided on a military spending target. The CDP’s policies adhere closely to Japan’s postwar pacifist tradition.

It remains to be seen how much money may be available in the world’s most indebted country, or how it will be spent. Four months after the Russian attack, polls show voters’ priorities gradually shifting away from national security and back to pocketbook issues like reviving the economy.

With the government urging consumers to cut electricity use this summer amid a supply shortage and skyrocketing costs, the LDP has promised to restart nuclear reactors when they are declared safe. Resistance to atomic energy is fading, even in a country traumatized by the 2011 Fukushima nuclear disaster.

On the contrary, the opposition CDP has promised to move towards a society without nuclear energy.

“We can’t rely on just one power source,” Kishida said. “An important element is nuclear energy. I want to continue with the restarts when the security is confirmed.”

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