Japan’s Ruling Coalition Collapses, Casting Doubt on Sanae Takaichi’s Bid for Prime Minister

Japan’s ruling coalition collapsed on Friday after its junior partner, Komeito, broke ranks with the Liberal Democratic Party (LDP) and its new hardline leader Sanae Takaichi, throwing her bid to become the country’s next prime minister into uncertainty.

Takaichi, elected last weekend as the new head of the LDP, must still secure parliamentary approval later this month to become Japan’s first female prime minister.

Although the LDP remains the largest party in parliament, it lacks a clear majority, and the main opposition has urged other parties to unite behind an alternative candidate.

Komeito leader Tetsuo Saito told party members that the 26-year-old alliance had ended due to what he described as the LDP’s “insufficient explanation” regarding a long-running political funding scandal that has dogged Japan’s ruling establishment for years.

Saito confirmed that Komeito would not back Takaichi in the parliamentary vote for prime minister, originally expected around October 15, though the timeline may now be delayed due to the political turmoil.

The LDP currently falls 37 seats short of a majority in the powerful lower house. Opposition parties are expected to nominate their own candidates when the Diet convenes to select the next leader.

Under Japan’s parliamentary rules, any candidate who wins a simple majority in the first round is approved. If no one secures a majority, the top two contenders face off in a second-round vote.

Market reaction and opposition moves

The yen, which earlier this week had fallen to an eight-month low on expectations of Takaichi’s potential fiscal expansion, strengthened 0.5% to 152.38 per dollar following the coalition split.

With Komeito’s exit, Takaichi may now seek new alliances — possibly with the Democratic Party for the People (DPP), known for its more fiscally expansionist stance.

However, the main opposition Constitutional Democratic Party (CDP) has signaled it could support DPP leader Yuichiro Tamaki, a charismatic lawmaker, as a unified opposition candidate to challenge Takaichi.

Takaichi’s selection as LDP leader last week had initially lifted the stock market and weakened the yen, as investors scaled back expectations of imminent interest rate hikes. A staunch supporter of former Prime Minister Shinzo Abe’s “Abenomics” stimulus policies, she is viewed as a fiscal dove who favors aggressive economic support.

Economist Takahide Kiuchi of Nomura Research Institute noted, “If the opposition parties and Komeito rally behind Tamaki, Japan could see the emergence of a coalition government led by the opposition. In that case, the recent market reactions to Takaichi’s policies would likely reverse.”

A shift in Japan’s political landscape

Komeito’s secretary-general Makoto Nishida said at a press conference that Japan has now entered “an era of multiparty politics,” adding that his party aims to become “a centrist, reform-oriented force at the heart of this new political alignment.”

The LDP, which has ruled Japan for most of the postwar period, also lacks a majority in the less powerful upper house — a factor that could further complicate Takaichi’s path to leadership.