The employment of Prime Minister Shigeru Ishiba on power was even more weakened after his Liberal Democratic Party (LDP) and his coalition partner Komeito lost their majority in the elections of the high chamber of Japan on July 20.
Voting marks a historic change: for the first time since 1955, the LDP does not control any Parliament of the Japan Chamber. While Ishiba swore to stay on, the pressure rises in the LDP. The previous ministers who suffered similar defeats resigned in a few months; Several competitors are now positioning themselves for a leadership challenge.
The reduced power of LDP has mixed implications. The Tokyo Stock Exchange remained closed for a holiday after the elections, but the Yen has strengthened slightly, suggesting that the markets had a price in loss. However, political uncertainty could complicate commercial negotiations, tax reform and monetary policy, especially when opposition parties put pressure on aggressive expenses that could limit the banking of the Japan room to maneuver.
The secretary of the United States of the Treasury Scott Bessent, speaking on CNBC after a visit to Japan the day after the elections, minimized Japan’s volatile policy, declaring that Washington remained focused on securing trade agreements, which occurred on July 22, when the United States agreed to lower 27.5% of 15%. But they could still sting Japanese cars and wider exports, which could destabilize bilateral links if the weakened government of Ishiba fails.
The election has also exposed increasing interior tensions. The frustration of the public concerning inflation, in particular the rise in rice prices, combined with the stagnation of wages, has eroded confidence in the direction of LDP. The Farright Sanseito party has gone from a seat to 14 in the Chamber of Councilors, amounts to an anti-immigration platform which signals growing hostility towards foreign workers and residents.
The rise of Sanseeito poses concerns for the 3.77 million foreign residents of Japan and the record number of tourists who have visited the country so far in 2025. Although the economic contribution of these groups is vital – tourist expenses have succeeded in reaching 32 billion dollars this year – The rhetoric of Sanseeito includes permanent proposals.
With the leadership of Ishiba in question and the populist forces which gain ground, Japan enters a period of uncertainty, say the close observers. For the moment, the eyes remain on the next LDP decision and if a new Prime Minister can be more effective in restoring economic and political confidence.