Will Japan’s Fumio Kishida call an election this year? Weak yen, economic woes make it ‘difficult’, analysts say

A weaker currency and higher prices have largely cancelled out the boost from the end of the pandemic and last month’s G7 meeting in Hiroshima

Observers say Kishida is unlikely to call a general election until next year ‘at the very earliest’, as inflation lingers and wages remain stagnant

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The yen’s depreciation in recent weeks could lead to more price increases for a Japanese public that is weary of higher costs while wages have remained largely static. Photo: Bloomberg

Published: 8:07am, 27 Jun 2023Updated: 11:04am, 27 Jun 2023

The relentless weakening of the yen is causing concern at both the Bank of Japan and in the Japanese government, with analysts indicating that rising prices and growing public discontent make it unlikely that Prime Minister Fumio Kishida will call a general election this year.

Buoyed by the end of the pandemic, a return to economic stability in the early months of the year and with Japan basking in the afterglow of a Group of Seven meeting in Hiroshima last month, there was a widespread belief that Kishida was gearing up for a general election – possibly in late summer.

But the yen’s depreciation in recent weeks appears to have undone those achievements and could lead to more price increases for a Japanese public that is weary of higher costs while wages have remained largely static. And that, experts agree, makes calling an election simply too much of a risk for Kishida.

Until recently, there was a widespread belief in Japan that Prime Minister Fumio Kishida was gearing up for a general election. Photo: Kyodo

Masato Kanda, the vice-minister of finance for international affairs, said on Monday that the yen’s decline in value against the dollar and euro was “rapid and one-sided”. The yen was moving in a band around 143 to the dollar on Monday morning, a seven-month high.

Against the pound, the Japanese currency was trading at 182.66, the highest since December 2015. The yen was at a 15-year high against the euro and was similarly strong against the Australian dollar.

Japan last intervened in the currency markets in September and October to counteract the yen’s fall against the dollar and Kanda confirmed that the government could be forced to act once again, saying, “No options are ruled out.”

The yen’s slide is a result of the widening of the interest rate gap between Japan and the central banks of the US and Britain, said Martin Schulz, chief policy economist for Fujitsu’s Global Market Intelligence Unit. But there are some major differences between now and when Japan last intervened.