The Rising Tide of Economic Populism in Japan

The Liberal Democratic Party’s dismal performance in last year’s lower house election was largely caused by the public’s distrust of its perceived corruption. However, there is also strong evidence to suggest that the LDP’s failure to present a sound economic policy has discredited them in the eyes of the public.

In the lower house voting for proportional ballots – in which Japanese voters select their preferred political party – two parties stood out: the Democratic Party for the People (DPFP) and Reiwa Shinsengumi. Most of major political parties had suffered a significant decrease in their ballot counts in comparison to the previous national election. The LDP saw its share drop by 26.77 percent (approximately 5.33 million votes), Komeito by 16.16 percent (approximately 1.15 million votes), Nippon Ishin by 36.59 percent (approximately 2.94 million votes), and the Japanese Communist Party by 19.28 percent (approximately 0.8 million votes) respectively. On the other hand, proportional ballots for the DPFP and Reiwa exploded, the former increased its share by 137.97 percent (approximately 3.57 million votes) and the latter by 71.74 percent (approximately 0.8 million votes).

What elevated these two political parties and led millions of voters to abandon the rest? One potential explanation is that both the DPFP and Reiwa pitched a clear and intriguing economic policy agenda. As a campaign slogan, the DPFP raised the banner that they will “increase take-home pay.” Throughout the lower house election campaign, party leader Tamaki Yuichiro – whose duties have been suspended following a sex scandal that was revealed following the election – hammered their simple and concise economic message again and again. And with Tamaki’s internet savvy, his party was able to appeal to younger voters who have been affected the most by the rising costs of living and social insurance premiums; exit polls showed that the DPFP proved to be most popular among voters in their 20s and 30s.

Similar to the DPFP, Reiwa’s messaging during the lower house election was also heavily tilted toward addressing the insecurity that is being felt by the electorate as a result of inflation (which remains at a considerably lower rate than in Western countries in recent years, but is significantly higher than the last three decades under Japan’s persistent deflation). One of the major policy prescriptions that Reiwa has been arguing for is to abolish the consumption tax, which is levied on every good and service at the rate of 10 percent. They also advocate for a seasonal inflation benefit of 100,000 yen that would be distributed during summer and winter.

The rise of the DPFP and Reiwa is a snapshot of the political climate of Japan today. A significant number of Japanese people don’t think that the economy is managed for the benefit of their own livelihood, and to some extent believe that the elite’s incompetence has caused such circumstances. This is evident in the growing online criticism that the Ministry of Finance (MOF) in particular has been receiving.

In 2023, economic pundit Morinaga Takuro published a book called “Zaimu Shinrikyo,” coining a new term by combining the word “Zaimu” that is taken from the Zaimusho (the Ministry of Finance) and “Shinrikyo,” a word often associated with Oumu Shinrikyo, the fanatic religious organization that plotted a terrorist attack in the Tokyo subway in 1995. Morinaga equated the MOF with a religious cult because, in his opinion, its members were beholden to the idea that the government should maintain a balanced budget no matter what, even if the increase of public spending may better the public's lives.

It is true that the MOF is one of the most powerful agencies in Japan due to the vast amount of information they harvest among their peer bureaucracies in the process of drafting a budget. However, the ballooning of the deficit, increased social security spending – and in recent years the growing defense budget – are all evidence of the MOF’s deference to the demands of elected officials, which proves Morinaga’s claim to be overly exaggerated. However, the argument has seemed to trump reality; since its publication, Morinaga’s “Zaimu Shinrikyo” has sold more than 210,000 copies, making it a massive best seller in an era of declining purchases of physical books.

Sensing the opportunity for using the MOF as a scapegoat, party leaders of the DPFP and Reiwa are parroting the same lines that were presented by Morinaga. Following a series of news reports that showed the cost – trillions of yen – of the DPFP’s signature policy promise to increase the ceiling of the income tax bracket, Tamaki ridiculed MOF officials on X by accusing them of disseminating negative information to reporters: “The effect of the Ministry of Finance going around ‘explaining’ the situation, including to the media, is indeed impressive. This morning’s newspapers were all full of negative comments such as ‘7.6 trillion yen decrease in revenue’ and ‘higher income earners will benefit more.’”

A couple of months later, Reiwa Party General Takaki Takashi reposted a video of himself advocating for dismantling the MOF, with a comment reiterating that he stood by that position.

The growing antagonism toward the elites who are perceived to have mishandled the economy goes hand-in-hand with the public’s desire for the government machinery to work more visibly and aggressively to serve the their financial needs. These trends, which could be described as economic populism, have, in recent months, augmented the influence of the DPFP, which was seen as a dying organization not so long ago. In polls released in December, and January, the DPFP recorded the highest approval rating among all opposition parties, second only to the LDP itself. Reiwa too has ridden the tide of economic populism, beating the CPJ – a party that is far more fiscally conservative than Reiwa – in the number of proportional ballots. This symbolizes the change in policy preferences among the progressive electorate in Japan, which longs for a government that is more generous.

Japan has seen occasional outbursts of populism in some shape or form throughout the years. However, what is different from the past is that economic populism is shifting into something more desperate. Today, the roots of populism in Japan seem to lie in the basic needs of the public to make ends meet, as demonstrated by the DPFP’s and Reiwa's ascent. Both parties offer bolder solutions than their populist predecessors.

With a new U.S. president set to disrupt the international economy, and a constrained monetary policy as a consequence of Abe Shinzo’s unprecedented economic policy, there is a limit to Japan’s ability to control prices. Inflation will likely prolong, which will have deep political repercussions. If the economic outlook continues to turn grim, will the message of the DPFP and Reiwa continue to gain relevance, forcing actors to find new scapegoats and inflate promises that are seemingly out of reach?