Scandal-Hit Abe Plunges Into Crisis After Tokyo Election Loss

(Bloomberg) -
Japan’s Prime Minister Shinzo Abe. (Reuters/Toru Hanai, File)

Scandal-hit Japanese Prime Minister Shinzo Abe faces one of the biggest tests of his four and a half years in power, after his ruling party lost to an upstart outfit in an election for Tokyo’s assembly.

The Liberal Democratic Party was projected to win its lowest number of seats ever in the capital in a poll that can be a harbinger for national elections. Tokyo Governor Yuriko Koike’s Tomin First (Tokyo Residents First) party was tipped to win 49-50 spots in the 127-seat assembly. It had six beforehand, gaining a majority after teaming up with Abe’s coalition partner Komeito in the city.

The LDP was forecast in a survey and exit polls by public broadcaster NHK to secure 19-29 seats, prompting party executives to call an unusually extraordinary meeting for Monday morning.

“It looks like a tough situation,” LDP Secretary General Toshihiro Nikai said in remarks carried on local broadcasts. “It’s the judgment of the people of Tokyo and of the country so we must accept it seriously, reflect deeply on what should be reflected on and do everything we can to restore our party.”

A spate of scandals has eroded support for Abe, and Sunday’s vote may stir criticism within the LDP, where potential rivals are positioning themselves to try and end his run as Japan’s third-longest serving premier since World War II. The result may spur the prime minister to shuffle his cabinet and slow his controversial push to revise Japan’s pacifist constitution.

“This is major, it’s serious,” said independent political analyst Minoru Morita. “He will have to reshuffle the cabinet, but that won’t resolve the situation. People are turning their backs on Abe and on the LDP.”

Abe’s rush to change the constitution to make clear the legitimacy of the country’s Self-Defense Forces has “handed his critics a cudgel with which to attack his leadership,” according to Tobias Harris, a Japan analyst at Teneo Intelligence in Washington.

“Criticism over constitutional revision could be the thin end of the wedge for broader criticism of Abe’s leadership,” Harris said. “I wonder whether we’ll also see Abe backed into a cabinet reshuffle that is sooner than he wanted and more extensive than he wanted.”

It could also hurt the party’s chances in a national election due next year. In 2009, a big loss for the LDP in Tokyo preceded a landslide general election defeat months later.

Hakubun Shimomura, head of the LDP’s Tokyo chapter, said that national politics led to the result. Abe met for dinner with party heavyweights including Finance Minister Taro Aso and Chief Cabinet Secretary Yoshihide Suga, where they agreed they had to humbly accept the verdict of the Tokyo people, Kyodo News reported.

Yosuke Takagi of Komeito’s Tokyo chapter said there would be no change to the coalition with the LDP in the national parliament. Still, the Buddhist-backed party may become a more vocal critic of Abe, both on the scandals and constitutional issues, according to Harris.

Koike, who defected from the ruling party last month, campaigned on a platform of open government and cutting wasteful spending in the city of 13.7 million, which accounts for about a fifth of Japan’s economy. The LDP sought to portray her as indecisive for delaying the relocation of the iconic Tsukiji fish market over pollution concerns and insisting on reviewing the ballooning cost of the upcoming sport games.

“People appreciated the results we have achieved by taking the point of view of Tokyo residents,” Koike said, adding she was surprised by the scale of her win. “I think this is an opportunity to make the Tokyo assembly what it should be.”

Abe, 62, has suffered a series of gaffes by his ministers and allegations of cronyism over government support given to a school run by a friend.

A loss of Tokyo for the LDP could weigh on Japanese equities and lift the yen against the dollar over the short-term, according to Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. It could prompt Abe to increase fiscal stimulus, he said in an emailed note before the results were released.

In a speech in Tokyo on Wednesday, Abe apologized for the angry exchanges over scandals that dominated the last parliamentary session, and vowed to fight on. “A castle that takes three years to build can be destroyed in a day,” he said.

Demonstrators heckled Abe during his final stump speech on Saturday evening, calling for him to “resign” or “go home.”

Koike, 64, is a former tv journalist fluent in English and Arabic who has served as environment minister and defense minister, as well as an LDP executive. The win gives her momentum to take her more populist message to the national stage.

In the 2009 Tokyo poll, the LDP and Komeito lost their dominant position in the assembly, months before a resounding defeat to the Democratic Party of Japan in a general election that led to more than three years in opposition. This time, however, Abe doesn’t have to call a vote until December 2018, a few months after the LDP is due for a formal leadership election.

“It’s almost a foregone conclusion that someone will run against Abe” in 2018, Harris said. “The question is whether someone with a real chance of winning runs.”