Faction funding scandal deals another blow to Kishida

Update: Matsuno axed

Prime Minister Kishida addresses a meeting of the government-ruling coalition liaison conference. Source: Prime Minister’s Office

Already struggling with plunging approval ratings and a pronounced sense of drift, Prime Minister Kishida Fumio is now grappling with a campaign finance scandal centered on the Liberal Democratic Party’s largest faction but implicating all of the factions in some form.

What’s happening

The Tokyo Public Prosecutors Office has opened an investigation into whether the Abe faction – and possibly other LDP factions – have violated campaign finance law by failing to report income raised from ticket sales for the faction’s fundraising parties, with unreported funds allegedly used as a “slush fund” for the faction’s members. Every LDP faction has since admitted to underreporting income from ticket sales, and the Nikai faction s also suspected of using unreported funds for kickbacks to faction members. Prime Minister Kishida Fumio has, in response, announced that the party’s factions will suspend its fundraising parties until further notice, and has also stepped down as the head of his eponymous faction.

There are two separate allegations. First, multiple lawmakers would sell tickets to the same business or organization –with each sale less than the JPY 200,000 (USD 1,382) threshold required for reporting the donation – but the factions neglected to report the total amount donated, which of course exceeded the threshold. The more serious allegations concern the slush funds. Faction members are given a quota for the number of tickets they are expected to sell to a party; the criminal complaint alleges that the Abe faction only reported ticket sales up to each member’s quota. The proceeds from sales beyond their quotas would then be returned to the members and not reported on either the faction’s or the lawmaker’s income and expenditure statements. NHK has a good explainer here. As is often the case with campaign finance scandals in Japan, public outrage is less about the absolute sums of money than the sense of flagrant lawbreaking, influence peddling, and corruption.

While Kishida himself has not been accused of receiving kickbacks from a factional slush fund, the scandal has now engulfed Chief Cabinet Secretary Matsuno Hirokazu, an Abe faction member who is suspected of receiving more than JPY 10mn (USD 69,178) in kickbacks over the past five years. Other Abe faction members face similar accusations, including Nishimura Yasutoshi, the Minister of Economy, Trade, and Industry; Seko Hiroshige, the LDP’s upper house secretary-general; and Takagi Tsuyoshi, the LDP’s parliamentary affairs chair. (Nikkei on how these accusations are playing out in parliamentary questioning) The opposition has already begun calling for Matsuno’s and Nishimura’s resignations. Kōmeitō, meanwhile, has called upon Kishida to take responsibility and clean house.¹

Of course, as is also often the case with Japanese political scandals, it is unlikely that all of the facts have surfaced, and every media outlet will be digging for more.

Why it matters

There are three ways in which this scandal matters.

First, when I wrote previously that Kishida’s plunging approval ratings limited his room for maneuver, this is the kind of thing I had in mind. He simply does not have enough goodwill with the public to convince voters that he can be trusted for dealing with this scandal honestly and aggressively. He again looks reactive and indecisive, and the allegations against Matsuno will put him further on the defensive. At best, a key adviser has been neutralized; at worst, if Matsuno does end up having to resign, Kishida will pay a price for having stood by him instead of demanding accountability.²

Incidentally, it could also prevent Kishida from taking full advantage from a change in economic conditions. Just as this scandal has emerged, the yen has rallied against the dollar and other currencies amidst signs that the Bank of Japan could end its negative interest rate policy. If the yen were to strengthen in 2024 – and the consensus seems to be that between BOJ policies and the possibility of interest rate cuts by the Fed and other central banks, it will – inflationary pressures that have squeezed Japanese households could abate, easing a factor that has been a persistent drag on Kishida’s approval ratings. Instead, Kishida will be grappling with allegations that his LDP is rife with corruption.

Second, while it might seem that Kishida would benefit from a scandal that tarnishes the Abe faction’s reputation in particular, the Unification Church scandal already showed that that logic may not prevail. Kishida and the Abe faction are bound together. He needed the faction’s power to win in 2021, and his staying in power depends on its continuing support. But the faction has also been internally divided over who should lead it and whether it can field its own contender for the party leadership. Perhaps a more adroit politician better able to rally public support – a Koizumi campaigning against his own party – would be able to use this scandal to break ranks with the Abe faction, but I think it is clear at this point that Kishida is not that politician. This scandal will only deepen the Abe faction’s issues, not least because its most senior members will be most heavily scrutinized for their roles in this scandal.

Three, this scandal will only deepen the public’s malaise about Japanese democracy. I think it’s safe to say that at least part of the dissatisfaction with the Kishida government reflects a certain fatigue after eleven years of what we might call the “Abe system.” Kishida, already struggling to convince voters that he can govern dynamically and effectively, will now have to convince voters that his party is not flagrantly violating campaign finance laws.

Of course, there is no guarantee that the opposition – whether Ishin no Kai or the Constitutional Democratic Party – will be able to exploit this scandal to climb in the polls. Their inability to exploit Abe’s various influence-peddling scandals would suggest caution. It’s just as likely that this scandal could further discourage voters from turning out, which would make for a hollow mandate to govern.

But it is also possible that this time will be different. More time has passed, public dissatisfaction with both Kishida and the LDP are more pronounced than at any point during the Abe years, and Ishin no Kai seems better poised to attract independents than the Democratic Party of Japan or CDP did in the past. At the very least, events continue to conspire in Ishin no Kai’s favor.

What’s next

In the immediate term, all parties will be waiting to see whether there are any other major bombshells to come out of this scandal. There is more than enough to preoccupy the Diet through the end of the extraordinary session on 13 December. Beyond then, Kishida will hope that the parliamentary break and the New Year holiday will take some of the air out of the heat out of the scandal.

But even in the best-possible scenario – in which Kishida perseveres through the scandal’s acute phase and it recedes in importance – the damage has likely been done. It is difficult to see where Kishida can find an approval rating bounce in this climate.

It is also difficult to see how he will be able to threaten a snap election credibly, when both LDP and Kōmeitō officials would strongly resist going to voters in these circumstances, depriving Kishida of his best tool for party discipline and the surest means to secure another leadership term in September.

I increasingly wonder if what will see in 2024 is Kishida’s becoming a lame duck. As long as the scandal persists – and Kishida isn’t personally implicated in the wrongdoing – the LDP would seem to have little incentive to drive out Kishida and force a new leader to manage this scandal as the first order of business. At the same time, the LDP would have an incentive to use its leadership election to have a clean break with the frustrations of Kishida and hope that a new leader could call a snap election sometime after the LDP’s leadership contest, when there will be roughly a year remaining in the House of Representatives’s term. What remains to be seen is whether Kishida himself will reach a point of seeing himself as a lame duck and accept that another term isn’t in the cards.

UPDATE 10:00PM ET

Kishida has effectively fired Matsuno and will be picking a new chief cabinet secretary, according to Mainichi. On the one hand, by cutting Matsuno loose quickly, Kishida avoids having to spend political capital defending him only to have to axe him later. On the other hand, it’s probably a sign that this scandal will get worse before things get better if Kishida barely even tried to defend the chief cabinet secretary.

Developing…

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1. In keeping with the ongoing question about the future of the ruling coalition, how will this scandal affect the willingness of Kōmeitō volunteers and voters to uphold their end of the bargain?

2. Perhaps a silver lining is that this scandal has driven evidence about Kishida’s meeting with Unification Church officials in 2019 out of the headlines.