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Japan’s Liberal Democratic party has agreed to form a coalition with the reformist Japan Innovation party in a deal that paves the way for Sanae Takaichi to become the country’s first female prime minister.
Hirofumi Yoshimura, governor of Osaka and JIP’s leader, told Japanese media on Monday that an announcement to formalise the deal would be made later. People familiar with the LDP-JIP negotiations said the coalition deal was agreed in principle at meetings on Sunday.
Shares in Tokyo surged on news of the provisional agreement that brings to an end a period of uncertainty following the collapse of the ruling party’s 26-year coalition with Komeito.
The coalition would still not command a majority in parliament but is expected to give Takaichi enough support to be voted into office in a parliamentary vote scheduled for Tuesday.
Under the new arrangement, the JIP will not occupy any seats in Takaichi’s cabinet, but will support the LDP in passing budgets and other legislation.
231
Number of seats the coalition will control in 465-seat lower house
The right-leaning JIP is aligned with its new partner on several key issues, including support for constitutional reform and the removal of a provisional tax on petrol.
Two people familiar with negotiations said the LDP had also agreed to support several major policies on which the JIP has campaigned — reducing the number of MPs in parliament, and the elevation of Osaka to the official status of Japan’s “second capital”.
The new coalition will control 231 seats in the 465-seat lower house, and 120 of the 248 seats in the upper house. The mechanics of the prime ministerial vote, and the fact that opposition parties have not coalesced around a rival candidate for prime minister, mean that Takaichi is now virtually assured of victory.
The LDP is also continuing to hold talks with other small parties to secure the additional parliamentary votes it needs to pass laws.
Shares in Tokyo rose in the hope that the Takaichi administration’s policies will involve more fiscal spending and be broadly supportive of the equity market.
The Nikkei 225 Average rose 2.9 per cent in the morning session, hitting an all-time high.
Takaichi, an arch-conservative acolyte of the late prime minister Shinzo Abe, has hinted strongly that she will prioritise stimulus spending and restoring growth over fiscal discipline.
