Japan Ruling Party Set to Gain Seats in Tokyo Vote Before Games

(Bloomberg) -- Japanese Prime Minister Yoshihide Suga's ruling party is expected to gain seats in a Tokyo assembly vote about three weeks before the capital hosts the Olympics, providing a fillip for his prospects in a national election expected after the games.

Polling indicates Suga's Liberal Democratic Party has the most support among voters for the Sunday municipal assembly election, well ahead of its nearest challenger, Tokyoites First, which has called for holding the Olympics without spectators. The vote comes as virus numbers have been ticking up in Tokyo, raising worries about whether the government can stem infections before the July 23 opening ceremony.

Gains in seats would be good news for Suga, whose party suffered three by-election defeats in a single day in April, and would be seen as a sign of political stability by markets. In the 2017 vote, the LDP lost to what was then an upstart party riding on the coattails of its founder, Tokyo Governor Yuriko Koike.

“The LDP was at rock bottom last time around, so it will certainly make gains and that will be a plus for the prime minister,” said former LDP staffer turned political analyst Shigenobu Tamura of Sunday's poll. “If Suga calls a general election in September and wins, the way will be open for his re-election as party leader.”

The outcome may not be clear until early Monday. For investors, the focus will be on how the LDP performs.

“Markets are moving based on whether there will be uncertainty ahead in the fall or not,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co. “If the LDP were to gain a lot of seats, it would indicate political stability ahead and might support stock markets on Monday.”

The LDP currently holds only 25 seats in the capital's 127-strong assembly, while Tokyoites First controls 45. The latter is expected to lose many of its assembly members this time, according to polls by the Nikkei newspaper and other media. Sunday's election will not affect Koike's position as governor, to which she was re-elected for another four-year term in 2020.

A survey carried out by the Nikkei newspaper June 25-27 found almost 32% of respondents said they planned to vote for the LDP, compared with 12% for Tokyoites First.

Suga saw his initially high support crumble after he took office in September amid scandals and criticism of his handling of the coronavirus. His public approval has crept up slightly as the vaccine rollout sped up -- a factor likely to be key to success in a party leadership election in September and the general election, which must be held in the coming months.

But any serious fallout from the Olympics could mean Suga joins a long list of short-serving Japanese premiers, given voters are already disenchanted with the games. A survey carried out by the Mainichi newspaper among Tokyo residents June 26 found 58% said they opposed the games, compared with 30% in favor.

Koike has a complex relationship with the LDP, of which she was a senior member when she dropped her parliamentary seat to run for Tokyo governor in 2016. Tokyoites First lost momentum after Koike's failed attempt to merge opposition parties and topple then-Prime Minister Shinzo Abe in 2017, and she now acts as adviser to the party, rather than leader.

Usually an active campaigner in her own elections, Koike has been absent from the public eye since June 22, when she was hospitalized for what was described as fatigue caused by overwork. She left hospital Wednesday, and will work remotely for the time being, according to a press release from the metropolitan government.

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