Japan's Political Crossroads: Looming Coalition Challenges for PM Shigeru Ishiba

Japan faces a critical election, potentially disrupting Prime Minister Shigeru Ishiba's government amidst inflation and a funding scandal. The Liberal Democratic Party may lose its parliamentary majority, prompting power-sharing talks. Economic policies hang in the balance, affecting markets and voter sentiments.

Japan's voters are set to decide the fate of Prime Minister Shigeru Ishiba's government in a crucial election on Sunday, heavily influenced by a funding scandal and inflation challenges. The ruling coalition, led by the Liberal Democratic Party (LDP) and its partner Komeito, is anticipated to face significant setbacks, possibly losing their parliamentary majority, according to opinion polls.

The potential loss would compel Ishiba, in office only a month, to engage in power-sharing negotiations with smaller parties. Such political machinations could unsettle markets, especially if Ishiba aligns with a partner opposing the central bank's gradual interest rate hikes, amidst rising living costs and tense relations with China.

Experts warn that Ishiba could emerge as a weakened leader, forced into policy compromises, as the LDP might lose up to 50 seats, while Komeito could fall below 30. Meanwhile, the opposition Constitutional Democratic Party of Japan is poised to gain ground with 140 seats, as voters' prime concern remains addressing economic woes, tax cuts, and wage rises.

(With inputs from agencies.)