Shinzo Abe is now the third-longest-serving Japanese prime minister of the post-war era (including both his initial stint in 2006 and 2007, and his current administration, in power since 2012). But his time at the helm may be coming to an end. Approval ratings for his cabinet have slid rapidly, recently falling below 30%, viewed by many as the "death zone", and the lowest levels seen since his ill-fated 2007 administration.
Abe's fall from grace is partly due to reports linking him to two scandals involving school operators that won favours from the government. However, a more fundamental problem is that he has turned his focus away from the economy and instead to issues of constitution and foreign affairs, notes the Financial Times. These affairs may matter greatly to him, but they mean "little to the average voter". As a result, notes Marcel Thieliant of Capital Economics, "there is now a real chance that Abe will be out of office before the next legislative elections" in 2018.
But who might take his place? There are several potential challengers, but none stand out as the obvious victor. Foreign minister Fumio Kishida is one candidate, but he would benefit little from a coup. Another is former defence minister Shigeru Ishiba he has criticised Abe, but lacks sufficient party support. Another possibility is Tokyo's first female governor, Yuriko Koike. She is incredibly popular, but she does not have the necessary parliamentary platform to stage a threat. So it appears likely that Abe will remain in power as "although he is stumbling no challenger exists", notes Jiro Yamaguchi in The Japan Times. And the opposition Democratic Party of Japan is in no position to benefit: both the party and its supporters "remain slow".
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A bigger problem is that "Japan's reform momentum is under threat", notes Quentin Webb of Breakingviews.com. Abe's policy response from here is likely to be populist spending, as opposed to the "painful, but necessary, structural changes" that Japan needs to fuel growth and inflation, such as overhauling the highly rigid labour market. Yet Abenomics Abe's economic programme of monetary easing, fiscal stimulus and structural reforms "must continue, with Abe or without", notes the FT.
For now, investors will be keeping a close eye on Abe as he looks to rebuild public trust before next year's elections. This is likely to begin with a cabinet reshuffle this month, although this "will not end his difficulties", says The Economist. All that appears certain for now is that "for the first time since 2012, Abe is
James has previously written about financial markets for MoneyWeek. He has a bacherlors degree in management and he has been awarded an investment advice diploma by The Chartered Institute for Securities & Investment (The CISI). James then worked at Moran Stanley as a U.S. Equity Sales Analyst for two years, then moved into hedge fund sales and investor relations at 36 South Capital Advisors, and then became the Global Multi-Asset Sales at Credit Suisse. Now, James is the Associate Director of US Equity Sales at Oppenheimer & Co. Inc, where he is responsible for servicing a range of clients including asset managers, hedge funds and wealth managers.
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