Explainer: Nuclear Power Inflation: What’s at stake in Japan’s election

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People wearing protective masks walk in an aisle of Japanese Izakaya pub, amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan July 6, 2022. REUTERS/Issei Kato

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TOKYO, July 7 (Reuters) – Japan will vote in Upper House elections on Sunday that will have implications for Prime Minister Fumio Kishida’s grip on the ruling Liberal Democratic Party (LDP) and his ability to push through laws.

Here are some details on why the poll is important and some key policy issues:

WHY IS THE ELECTION IMPORTANT?

While the upper house is the less powerful of the two chambers of parliament, the vote is a pledge of support for the ruling bloc. If the LDP wins by a solid margin, as polls suggest, Kishida would be able to consolidate control of the party with three years to push through legislation before another election is due.

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A setback for the government could expose Kishida to challenges from rivals within the factional LDP.

ALL ABOUT INFLATION?

Rising prices are the key issue. Global commodity prices rose and the decline in the yen in turn pushed up the prices of fuel, electricity and food. Voters are sensitive to even small price increases due to years of deflation and stagnating wages.

The government has rolled out 2.7 trillion yen ($20 billion) in additional budget to help. This includes plans to soften the hit to oil prices via subsidies to gasoline wholesalers and other measures.

The additional budget will be financed by bonds, which could put additional pressure on the public debt already more than twice the gross domestic product (GDP). Kishida said he was ready to take further action, but did not give details.

DEFENSE

Kishida has promised to “substantially” increase defense spending in response to what he sees as fragile security in the region. Japan’s main concern is China’s growing power, concerns to which Russia’s invasion of Ukraine has given new urgency.

Kishida did not say how much the defense budget will increase in the next fiscal year or how any major increases will be funded. The defense budget for this fiscal year is 5.4 trillion yen, less than a quarter of what China spends.

In its election manifesto, the LDP called for doubling defense spending to 2% of GDP, which would be the minimum level that members of the North Atlantic Treaty Organization (NATO) have pledged to spend .

Opinion polls show that nearly two-thirds of voters support strengthening the army.

NUCLEAR RESTART

Soaring energy prices and the threat of power shortages during a recent heatwave have bolstered expectations that the government will restart some of the dozens of nuclear reactors idled after the 2011 Fukushima nuclear disaster.

Japan derives most of its primary energy needs from crude oil, while liquefied natural gas (LNG) accounts for more than a third of its electricity production. LNG supply has been complicated by Russia’s invasion of Ukraine.

Only 10 of Japan’s nuclear reactors are operational, down from 54 before 2011. Kishida said Japan needed to make “better use” of nuclear energy. Last month, he said Japan would use nuclear power “as much as possible” as long as safety was assured.

THE CONSTITUTION

Revising the constitution, particularly Article 9 renouncing war, has long been a goal of conservatives who see the US-drafted document as out of touch with today’s needs.

A strong performance by the LDP, its junior coalition partner Komeito and smaller right-wing opposition parties, such as the Japan Innovation Party, which is gaining ground, could create momentum for change constitutional.

The public has traditionally been skittish about the overhaul, although the crisis in Ukraine has bolstered support for a tougher defense.

Kishida, who hails from Hiroshima, the first city to suffer an atomic bombing, was on the more accommodating side of the LDP but has since veered to the right.

He said parts of the constitution might contain “outdated and missing” elements and hoped discussion on revising it could continue.

THE CENTRAL BANK

The search for the next Governor of the Bank of Japan (BOJ) is expected to intensify after the election. The incumbent, Haruhiko Kuroda, will complete his second five-year term in April.

Kishida’s choice is likely to determine whether the bank will stay on a dovish trajectory or change tack after years of ultra-loose policy that has now weighed on the yen and sparked public fire as prices rise.

Two people seen as the best candidates are outgoing deputy governor Masayoshi Amamiya, who orchestrated many of the BOJ’s stimulus measures, and former deputy governor Hiroshi Nakaso, who hinted that the short-term goal of the bank should be to end the revival of Kuroda.

($1 = 135.5100 yen)

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Reporting by Elaine Lies; Additional reporting by Tetsushi Kajimoto, Tim Kelly and Leika Kihara; Editing by David Dolan, Robert Birsel

Our standards: The Thomson Reuters Trust Principles.


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