Japan’s PM Pushes for Higher Wages as Election Talk Swirls

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(Bloomberg) -- Japanese Prime Minister Fumio Kishida pressed forward with his campaign for higher wages as a slide in his support rate seems to have halted and speculation re-emerges that he may opt to call a general election this year.

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Kishida underscored the need for pay rises to bolster the economy in a speech to parliament Tuesday that laid out his agenda for the new session. Dismayed at wage rises falling short of inflation and angered by a widespread political slush-fund scandal, voters sent his disapproval rating to a record level in a recent poll.

“We will do everything possible to achieve income hikes that exceed price rises this year. We must make this a reality,” Kishida said in the speech. “The government will do all it can to keep up the momentum,” he added.

Two surveys carried out over the weekend found upticks in support as Kishida vowed to clear up the scandal that’s rocked his ruling Liberal Democratic Party. If the trend continues and pay rises exceed inflation, he could be emboldened to seek to renew his mandate, though no general election need be held until 2025.

“There’s a theory an election could be held in June,” said Yu Uchiyama, a professor of political science at the University of Tokyo. “Income tax cuts will kick in and there will be pay rises after the spring wage negotiations, so the economy may improve.”

Despite one of the broadest-ranging scandals in decades, the LDP still boasts far higher support than any opposition group. It would likely stay in power as it has done most of the time since 1955, albeit potentially with fewer seats, if an election were to be held in the coming months.

Kishida has ordered income and residential tax rebates to help deal with the cost-of-living crunch and stepped up his pressure on companies to provide pay hikes that exceed inflation, including at a meeting with business lobbies and labor unions this month.

While inflation showed signs of slowing — falling below 2% in Tokyo data released last week — growing tensions in the Middle East that have pushed up oil prices and shipping costs may renew upward pressure on prices.

Meanwhile, headline wage growth for Japanese workers slowed sharply in November, the latest month for which the government has released data. Nominal cash earnings for workers rose 0.2% from the previous year, decelerating sharply from a 1.5% increase in October, the labor ministry said Jan. 10. While other figures in the release pointed to a stronger growth trend in pay, real wages still declined by 3%.

Pay rises will be a major factor in the Bank of Japan’s decision on whether to end negative interest rates, a move widely expected to come this year.

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Recent rises in support are less to do with Kishida’s efforts and more about the lack of a coherent opposition, said Kensuke Takayasu, a professor of political science at Waseda University in Tokyo.

“There’s nowhere for voters to take their criticism,” he said. “Even if they don’t like Kishida and the LDP, they are at a loss as to what to do about it.”

The option remains for Kishida to plow through without calling an election until his three-year term as LDP president expires in September, by which time a challenger may emerge. A poll by the Nikkei newspaper showed former Defense Minister Shigeru Ishiba, who has been critical of his own party, was seen as the most appropriate person to be premier, scoring 22% among respondents, compared with 3% for Kishida.

While such polls usually bear little relation to the party’s eventual choice, the aftermath of the scandal could play out in Ishiba’s favor. The party groups that have often decided who gets the top position without reference to public opinion have been weakened and in several cases abolished.

Three of the LDP’s five major factions — including Kishida’s own — have disbanded after a series of arrests and indictments over failure to declare money generated at fundraising events. Kishida has also vowed reforms to press such groups to focus on policymaking rather than money and power struggles.

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That could mean former faction-members end up holding a free vote rather than sticking together as a bloc, politics professor Uchiyama said, and they could opt for a candidate who is relatively popular with the public and the party at large.

The Nikkei found support for Kishida’s cabinet up 1 percentage point at 27% in its poll published Monday, and a Mainichi newspaper poll showed the number up 5 percentage points at 21%. Both polls still leave support in what as seen as the danger zone for a Japanese premier of under 30%. Almost 60% of the respondents to the Nikkei poll said they approved of the scrapping of party factions.

--With assistance from Takashi Hirokawa.

(Updates with analyst comment in twelfth paragraph.)

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