japan pm kishida bets on world defying inflation policy to win election - Japan PM Kishida bets on world-defying inflation policy to win election

TOKYO (BLOOMBERG) – As politicians around the globe rush to tamp down inflation, Japan Prime Minister Fumio Kishida is betting instead that older voters in particular will look past surging prices in a crucial election on Sunday (July 10).

Mr Kishida has endorsed the Bank of Japan’s unorthodox stance of keeping borrowing costs at rock-bottom levels even as inflation heats up and the yen has slid to a 24-year low.

During the campaign for the upper house election, Mr Kishida made the case that higher interest rates would hurt mom-and-pop shops and homeowners even more. The stakes in the vote – the last scheduled nationwide election for three years – are bigger than usual: A decisive win would cement Mr Kishida as prime minister for the foreseeable future, an outcome that was in doubt when he took power last October.

A weak victory, on the other hand, would raise questions about his strategy and add pressure on the central bank to shift course.

“I don’t see any economic factor pushing the BOJ to adjust policy now, but the risk is whether Kishida will change his stance toward monetary easing after the election,” said Mr Seisaku Kameda, a former BOJ chief economist. “That must be watched very closely.”

While most other world leaders have been more afraid of the political costs of inflation, in Japan it appears Mr Kishida’s strategy is paying off. Polls show his ruling coalition is on track to retain a majority in the upper house, with opposition parties far behind.

That’s in part due to voters like 85-year-old Tsugio Ito. The retired Tokyo shop owner, who survives on a monthly pension of 160,000 yen (S$1,650), said rising power costs are keeping him awake at night during a heatwave that has also exposed the fragilities of Japan’s power grid. “In this heat, if you don’t use the air conditioner, you’re gonna die,” Mr Ito said. “That’s what I mean when I say this is a matter of life or death.”

Still, despite all that, he plans to vote for Mr Kishida’s party – mostly because he doesn’t trust anyone else. “Despite all the various problems with the LDP, it has more clout than the other political parties,” Mr Ito said. “Even in our shopping district, we’ve had help building facilities many times after asking LDP representatives.”

That sentiment is broadly shared among elderly voters who make up about 30 per cent of the population and are much more likely to vote than other age groups. Their spending, meanwhile, accounts for almost 40 per cent of consumption in the economy.

Beyond the election, Mr Kishida is also watching to see if a potential pull-back in spending will derail an already sluggish recovery from the pandemic. At the same time, economists are looking for any signs that a greater acceptance of higher prices in an ageing society might finally deliver a stable and favourable form of inflation in Japan. For now, the concerns over spending seem the more likely to materialise.

“I really hope the government can come up with ways to make sure prices don’t climb any higher,” said Ms Moto Wakabayashi, an 81-year-old resident of Narashino, a city east of central Tokyo. “They’re already getting extremely hard to deal with.”

Like many seniors in Japan, Ms Wakabayashi has started reining in spending. She’s dropped salmon from her shopping list in favour of cheaper processed meat from a nearby Costco, with more penny-pinching likely ahead as she tries to keep within her pension budget.

At 2.5 per cent overall, Japan’s inflation is still far from the levels causing public dismay in other countries. But the pressure from key items is more intense: Even with government subsidies keeping a lid on items such as gasoline, energy prices rose 17 per cent in May, fresh food climbed 12 per cent and household appliance prices gained more than 7 per cent.