Japan's Ishiba Appointed Premier, Pledges To Beat Deflation

New Japanese Prime Minister Shigeru Ishiba, speaking in his first press conference as national leader, pledged to keep up efforts to decisively end deflation and called on the Bank of Japan to keep an accommodative policy to support efforts to boost prices and growth.

(Bloomberg) — New Japanese Prime Minister Shigeru Ishiba, speaking in his first press conference as national leader, pledged to keep up efforts to decisively end deflation and called on the Bank of Japan to keep an accommodative policy to support efforts to boost prices and growth.

“The Japanese economy is on the brink of beating deflation,” Ishiba said after being voted in as prime minister by parliament on Tuesday. “We will conduct economic and fiscal management that places the highest priority on achieving this.”

“I won’t comment on interest rates, but I look forward to the BOJ keeping its current stance to help us beat deflation,” he added.

After winning a dramatic ruling Liberal Democratic Party leadership election last week, Ishiba named his cabinet lineup and began to flesh out policies, as the pressure of managing the nation shifts onto the shoulders of a political idealist who has spent much of his long career offering critiques from the sidelines.

Ishiba’s near-term focus will be a national election he has called for Oct. 27, and in an early pitch to voters in his press conference he pledged to put together economic support measures, promote investment and raise the minimum wage. 

By opting for a quick election for the more-powerful lower house of parliament, the 67-year-old Ishiba is seeking to turn his public support into a mandate to rule. The appointment Tuesday of party veterans to the highest profile cabinet roles may provide stability for his administration in its early days.

Among his picks, the position of finance minister was handed to 68-year-old Katsunobu Kato, who has previously been the government’s top spokesman. The new foreign minister is 67-year-old Takeshi Iwaya, a close Ishiba confidante who has been defense minister.

In his press conference, Ishiba said he would continue the broad economic policies of his predecessor, Fumio Kishida, under which Japan has seen the emergence of wage growth and steadily rising prices. Many in government worry that Japan could still slip back into deflation after the impact of global upward pressure on energy and food prices eases.

Ishiba’s remarks came after the new minister in charge of economic revitalization, 63-year-old Ryosei Akazawa, called for the BOJ to be cautious in considering further rate increases after two hikes this year.

“We absolutely mustn’t do anything to cool the economy in any way for the time being,” Akazawa said.

At his press conference, Ishiba also reiterated his stance that there should be a review of Japan’s security treaty with the US to make it more balanced. As it stands, the US is committed to defending Japan in return for the use of military bases in Japan. Ishiba’s ideas include enabling Japan to have bases or do more training in the US. Ishiba said this would make the US-Japan security relationship stronger.

Upheaval in the ruling LDP after a series of scandals and the sidelining of senior power brokers could eventually present Ishiba with an internal challenge, and voter frustration over prices and the LDP’s past malfeasance may still lead to setbacks at the ballot box.

For now, Ishiba is riding high on a dramatic come-from-behind victory in the LDP leadership election. A public opinion poll conducted by the Mainichi newspaper over the weekend showed 52% of those surveyed were optimistic about the incoming Ishiba administration, while 30% expressed pessimism.

One challenge for Ishiba will be managing the right-wing members of the LDP after conservatives were excluded from cabinet and senior party leadership positions, said Rintaro Nishimura, a Japan associate at The Asia Group, an advisory firm. If Ishiba fails to appease this cohort, “I fear conservatives will do everything they can to stall or water down Ishiba’s policies,” Nishimura said.

Among Ishiba’s rivals are Sanae Takaichi, who surprisingly lost to Ishiba in a run-off in the LDP leadership election despite leading him in the first round of voting. Takayuki Kobayashi, the other major right-leaning candidate in the LDP election, also missed out on a cabinet position. 

Only two women were named to Ishiba’s cabinet, an indication that increasing female representation in key policymaking positions is likely not one of his top priorities. The average age of cabinet members including Ishiba remains at 63.5, making it one of the oldest among nations in the Organisation for Economic Co-Operation and Development.

Ishiba was comfortably approved by both chambers of Japan’s parliament thanks to the LDP’s dominance. He officially became prime minister earlier Tuesday after receiving the approval of Emperor Naruhito to form a government.

—With assistance from Yuko Takeo.

(Updates with comments from Ishiba’s press conference)