Japan votes in election expected to punish PM Ishiba's coalition

TOKYO - Japan's voters decide the fate of Prime Minister Shigeru Ishiba's government on Sunday (Oct 27) in an election expected to punish his coalition over a funding scandal and inflation, potentially ending a decade of dominance for his Liberal Democratic Party.

The LDP and its longtime partner Komeito will suffer a drubbing from voters, with the coalition possibly losing its parliamentary majority, opinion polls suggest, as Japan struggles with rising costs of living and increasingly tense relations with neighbouring China.

Losing the majority in the lower house would force Ishiba, in office just a month, into power-sharing negotiations with smaller parties, bringing uncertainty in some policy areas, although no polls forecast the LDP being ejected from power.

Political wrangling could roil markets and be a headache for the Bank of Japan, if Ishiba chooses a partner that favours maintaining near-zero interest rates when the central bank wants to gradually raise them.

"He'll be considerably weakened as a leader, his party will be weakened in the policies that it particularly wants to focus on, because bringing in a coalition partner will cause them to have to make certain compromises with that party, whatever party it may be," said Jeffrey Hall, an expert on Japanese politics at the Kanda University of International Studies.

The LDP could lose as many as 50 of its 247 seats in the lower house and Komeito could slip below 30, giving the coalition fewer than the 233 needed for a majority, a survey by the Asahi newspaper suggested last week.

"That's basically the scenario for 'sell Japan'," as investors ponder how the outcome could affect fiscal and monetary policy, said Naka Matsuzawa, chief macro strategist at Nomura