Japan's Political Crossroads: Ishiba's Gamble Amid Scandal and Inflation

Japan's Prime Minister Shigeru Ishiba faces a critical election as rising inflation and a funding scandal threaten his government's stability. With opinion polls suggesting a loss of parliamentary majority for the LDP and Komeito, Ishiba may have to form alliances with smaller parties, potentially altering key policies.

Japan's voters are set to determine the fate of Prime Minister Shigeru Ishiba's administration this Sunday. With escalating inflation and a funding scandal casting shadows on his coalition, the election could end the Liberal Democratic Party's decade-long dominance.

Opinion polls indicate a possible loss of parliamentary majority for the LDP and its ally, Komeito, as the nation grapples with increased living costs and strained relations with China. A diminished majority could compel Ishiba, only a month into his term, to seek alliances with smaller parties, introducing policy uncertainties.

The outcome could impact markets and present challenges for the Bank of Japan. Ishiba's potential partners might support maintaining low interest rates contrary to the central bank's gradual hike strategy. As polls predict, the LDP remains the largest parliamentary force, but setbacks could bolster the opposition, led by the Constitutional Democratic Party of Japan.

(With inputs from agencies.)