Japan election throws a wrench in Trump trade talks

Bad night for ruling coalition could cost Prime Minister his job and make it harder to strike a deal with Washington before August 1 tariff deadline

Shigeru Ishiba, Japan's Prime Minister, at the ruling Liberal Democratic Party’s press conference in Tokyo on Sunday night. Picture: AP

Japan’s ruling coalition suffered a significant loss in a parliamentary election on Sunday, a setback that risks derailing delicate trade negotiations with the US just weeks before punishing tariffs are set to take effect.

Prime Minister Shigeru Ishiba had gambled that his tough stance on trade with President Donald Trump would help cement his shaky grip on power after less than a year in the job and an electoral snub last northern autumn.

Instead, he lost his ruling coalition’s majority in an election for the Japanese parliament’s upper house, having already lost its lower house majority in a vote in October. Polling showed Japanese voters were far more focused on inflation and immigration than they were on US tariffs, a combination that has proved toxic to incumbent parties around the world and propelled the rise of populist alternatives.

A maverick politician who secured the premiership on his fifth attempt in September, Mr Ishiba could now face calls to resign, although he insisted on Sunday that he would stay on as talks with the US are at a critical moment.

His ouster would risk igniting political turmoil just weeks before the August 1 deadline to strike a deal on trade with Washington or accept tariffs of 25 per cent on US imports from Japan. Such a steep increase in duties in Japan’s largest foreign market risks tipping its export-heavy economy into recession, economists say.

“We are currently engaged in truly down-to-the-wire tariff negotiations with the US,” Mr Ishiba said on Sunday in a television interview as results were coming in. “I myself have met face to face with President Trump twice and spoken with him numerous times on the phone. This is something we mustn’t let go to waste.”

Mr Ishiba’s weakened position means his government may struggle to persuade enough politicians to back any agreement it does manage to make with Washington, especially if it involves concessions on sensitive sectors such as agriculture or auto.

The tumult shows how Mr Trump’s all-out push to reorder global trade is rattling the domestic politics even of close US allies.

“The world has changed. We all live in Trump’s tariff world now, and we all have to adjust to that,” said former US trade negotiator David Boling, director of Japan and Asian trade at consulting firm Eurasia Group.

US Treasury Secretary Scott Bessent meets with Ryosei Akazawa, Japan’s chief negotiator in trade tariff talks, in Osaka on Saturday. Picture: AFP

In Sunday’s vote, Mr Ishiba’s ruling Liberal Democratic Party and its Komeito coalition partner needed to win at least 50 seats to hang on to their majority in the Japanese parliament’s upper house, the less powerful of the two chambers in Japan’s Diet.

Their final tally was 47 seats, according to results published by public broadcaster NHK.

Sanseito, a fledgling right-wing party that wants to limit immigration and promises to put “Japanese first”, finished fourth with 14 seats, an upset in a country where the populist fringe has so far made little headway.

The LDP nonetheless remains the largest bloc and under Japan’s parliamentary system, Mr Ishiba or his successor can try to stay in power by leaning on smaller parties for support to pass legislation.

On the election stump, Mr Ishiba touted his tough approach to trade talks as standing up for Japan, part of the LDP’s broader message that it alone has the experience to navigate global challenges that include threats from North Korea and China.

“This is a battle for our national interest,” he said in a July 9 speech in the port city of Funabashi, east of Tokyo.

Sohei Kamiya, leader of fledgling right-wing party Sanseito, which finished fourth with 14 seats, an upset in a country where the populist fringe has so far made little headway. Picture: AFP

Talks with the US have become bogged down over auto tariffs in particular. The auto sector is a mainstay of Japan’s economy. Tokyo has been seeking relief on a 25 per cent levy Mr Trump imposed on imported cars, which is squeezing profits at makers including Toyota and Honda.

Japan is also trying to reduce or secure exemptions on “reciprocal” tariffs the White House announced in April that cover almost all US imports. In a series of letters to world leaders this month, Mr Trump extended to August 1 an early July deadline for countries to make deals to avoid those rates, giving his team more time to secure agreements beyond the handful achieved so far. His letter to Mr Ishiba raised the planned tariff on Japanese products to 25 per cent, from 24 per cent previously, which many analysts interpreted as a sign of White House frustration with Tokyo.

In his second term, Mr Trump has embraced tariffs as the main tool of his economic and foreign policy and a permanent feature of the US economy.

Countries including the UK, Indonesia and Vietnam that have reached agreements with the White House have all had to swallow higher tariffs. Analysts say Japan will need to do so, too, if it is to avoid the punitive rates Mr Trump has floated.

In seeking substantial tariff reductions, if not outright relief, Mr Ishiba “misread the room”, said William Chou, deputy director of the Japan Chair at the Hudson Institute, a Washington DC-based think tank.

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