LDP and Ishin Coalition Faces Its First Major Test as Policy Frictions Mount

2026 will put the coalition government formed by the Liberal Democratic Party (LDP) and the Ishin no Kai (Ishin) in October 2025 to a critical test. While the alliance succeeded in passing a supplementary budget during 2025's extraordinary Diet session, it has yet to fully resolve differences over plans to reduce the number of seats in the Lower House.

Additional challenges loom in the ordinary Diet session convening on January 23, including legislation tied to the proposed "secondary capital" concept. The "secondary capital" concept refers to plans to develop a second administrative hub outside Tokyo to ensure government continuity during major disasters and reduce overconcentration in the capital.

Whether Prime Minister Sanae Takaichi will opt for an early dissolution of the House to solidify her administration's footing has also become a key point of focus.

Reform Momentum Meets Coalition Reality

At a New Year press conference on January 5, the Prime Minister said she wanted to "further energize the momentum for forward-looking reforms born in 2025 and boldly take on difficult reforms," pointing to the abolition of the provisional gasoline tax rate as a concrete example of progress.

Toward the end of 2025, the Prime Minister met with Ishin leader Hirofumi Yoshimura at the Prime Minister's Office. There, the two confirmed their intention to pass legislation on the secondary capital concept and seat reductions during the ordinary Diet session. When Yoshimura said he wanted to "push ahead and pass the bills to move Japan forward," the Prime Minister responded, "Let's move this forward."

Even so, fault lines within the coalition have already emerged over the seat-reduction bill. Ishin has positioned the measure as the linchpin of its reform agenda. However, the LDP, facing internal opposition, has taken a more cautious approach, exposing strains within the partnership.

The secondary capital concept could prove similarly contentious. Although the coalition agreement commits both parties to passing related legislation during the ordinary Diet session, skepticism remains within the LDP, where some view the proposal as serving Ishin's narrow political interests.

Both parties had initially planned to organize key discussion points by December 2025 in preparation for submitting legislation. Disagreements over the criteria for designating a secondary capital prevented consensus. However, the parties pushed deliberations into 2026. The question remains whether, should Ishin's core objective stall, would pressure within the party intensify, forcing it to withdraw from the coalition?

Married on the First Date

Formed after just over a week of negotiations, the coalition is limited to cooperation outside the Cabinet. An LDP senior official likened the partnership to "getting married on the first date," adding, "You have to wonder how long it will last."

Against this backdrop, the LDP has begun courting the Democratic Party for the People (DPP), whose policy positions are also closely aligned with the Takaichi administration. In December, the Prime Minister secured the DPP's cooperation in passing the FY2026 budget by offering concessions in negotiations over raising the so-called "income wall" to ¥1.78 million JPY (around $12,000 USD).

*A new deal raises the income tax-free threshold, boosting take-home pay for many workers, but meaningful tax cuts remain limited and temporary overall.*

At the same time, the LDP is exploring ways to repair ties with its former coalition partner Komeito, with an eye toward cooperation in national elections. Depending on how the LDP–Ishin partnership evolves, the government's overall framework could shift again in 2026, following 2025's realignment.

Dissolution Calculus and the Limits of Power

Although the ruling bloc has narrowly regained a majority in the Lower House, governance remains precarious. Some observers speculate that the Prime Minister could move toward dissolving the House during the ordinary Diet session while her Cabinet approval ratings remain relatively strong.

Takaichi, however, has emphasized the need to "swiftly pass the budget and related legislation," making an early dissolution at the outset of the session unlikely.

Once the budget is enacted, the Diet is expected to take up bills to establish a national intelligence agency to strengthen intelligence-gathering capabilities, along with legislation tightening restrictions on land purchases by foreign nationals. A dissolution later in the session, after advancing these priority measures, is therefore considered more probable.

Some LDP insiders say the timing of any dissolution ultimately depends on whether the party can secure an outright majority on its own. Yet the LDP's support ratings remain sluggish, casting doubt on its ability to significantly expand its current seat count. Even in the event of a Lower House victory, the ruling bloc would still lack a majority in the Upper House for the foreseeable future.

The ruling parties currently hold a majority in the Lower House and can work with select opposition parties to pass budgets and legislation. As a result, some veteran LDP figures argue there is "no need for an early dissolution."

(Read the article in Japanese.)

Author: Keita Ozawa, The Sankei Shimbun