Japan’s ruling bloc suffers setback in Tokyo vote ahead of Olympics


(Bloomberg) – Japan’s ruling coalition failed to secure a majority in a Tokyo Assembly vote, dealing a blow to Prime Minister Yoshihide Suga, who is set to call a general election after the Olympics , which start in about three weeks.

Suga’s Liberal Democratic Party, which previously had 25 seats out of a 127-seat assembly, won 33 seats in Sunday’s election, according to data from the public broadcaster NHK. Coalition partner Komeito remained at 23 seats, both of which fell short of the 64 needed to secure a majority. The main national opposition force, the Constitutional Democratic Party, nearly doubled its representation from eight to 15 seats, NHK said.

The results indicate some fragility for the government as the number of viruses rises, which could prompt the ruling coalition to advance plans for more spending ahead of general elections slated for this fall.

“Voters’ distrust of government virus policies was stronger than expected,” Bloomberg economist Yuki Masujima said. “This increases the chances that Suga’s government will continue to discuss a significant supplementary budget of up to 30 trillion yen ($ 270 billion) before the general election.”

The lingering impact of the pandemic has led analysts to rule out a strong economic rebound in the second quarter as restrictions continue to hit the service sector. The LDP is set to compile plans for a stimulus package this summer and pass a supplementary budget to fund it after the election, the Sankei newspaper reported on Sunday evening.

The Nikkei 225 fell 0.6% in morning trading, fearing election results point to political uncertainty. But Shoji Hirakawa, chief global strategist at the Tokai Tokyo Research Institute, said if the ruling bloc pushes stimulus measures in the economy ahead of the national vote, it could be positive for stocks.

Suga said he would humbly accept the inability to reach a majority, telling reporters on Monday he would analyze the results and prepare for the next election.

Suga’s block setback came amid accelerating infections in Tokyo, which rekindled concerns about a possible increase triggered by the Olympics, which open on July 23.

Tokyoites First, which had called for hosting the Olympics without spectators to reduce the risk of the virus, saw its seats drop from 45 to 31, according to NHK, remaining almost as large as the LDP.

In the last assembly vote in 2017, the PLD lost to what was then a party that had followed in the footsteps of its founder, the governor of Tokyo, Yuriko Koike. The LDP and Komeito suffered minimal seat losses in a national election a few months later, retaining their strong majority in the powerful lower house of parliament.

Suga continued preparations for the Olympics despite widespread concerns about the staging of the global sports spectacle during a pandemic. Any serious fallout from the games could mean Suga is joining a long list of short-lived Japanese prime ministers, given that voters are already disappointed with the games.

The NHK exit poll found that 36% of those polled said the Olympics should be canceled or postponed, while 38% said the event should take place without spectators. About 21% said they supported the games’ current plans.

Suga saw his initially high approval crumble after taking office in September amid scandals and criticism over his handling of the coronavirus. Support increased slightly as the vaccine rollout accelerated. While the initially delayed rollout of vaccination in Japan has accelerated, only 12.7% of the population is fully vaccinated, leaving many at risk. There are also signs that the program is slowing down.

“Depending on the spread of the coronavirus after the Olympics, voices could go to the CDP,” economist Hiroaki Muto of Sumitomo Life Insurance Co. said of the upcoming general election. “The LDP might not win as convincingly as it hoped,” he added, saying the prospect could prompt the government to match the CDP’s calls for around 33 trillion yen in additional spending. .

But with the CDP polls at around 5% support rates, the group is unlikely in the general election to topple Suga’s ruling bloc, which has a deeper pool of candidates and a much better funded political machine.

Sunday’s election will not affect Koike’s position as governor of Tokyo, to which she was re-elected for a second four-year term in 2020. After remaining out of public view for more than One week due to exhaustion, Koike appeared at several Tokyo First events. Saturday, the last day of the campaign.

(Updates with market reaction.)

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