(MENAFN- Live Mint) Japan's path to appointing Sanae Takaichi as its first female prime minister has been thrown into uncertainty after the country's ruling coalition fractured on Friday. The Komeito party, a junior partner of the long-dominant Liberal Democratic Party (LDP), announced it would no longer back Takaichi in the upcoming parliamentary vote.

Why did Komeito withdraw from the coalition?

Komeito leader Tetsuo Saito explained that the 26-year alliance with the LDP had ended over the ruling party's failure to adequately address a longstanding political funding scandal.

“We have cooperated over the last 26 years, including when we were out of power. That this relationship is coming to such a conclusion is extremely regrettable,” Sanae Takaichi said in response.

Saito confirmed that Komeito would not support Takaichi in the lower house vote expected later this month, complicating her path to the premiership.

How does this affect Takaichi's parliamentary majority?

Sanae Takaichi, elected LDP leader last week, now faces a 37-seat shortfall in the lower house, leaving her dependent on securing support from at least two other parties to pass legislation.

“This is extremely regrettable,” Takaichi reiterated, stressing that she would do everything possible to win parliamentary backing.

With Komeito gone, she may attempt to forge alliances with smaller parties such as the centre-right Innovation Party. However, political analysts note that these parties may be hesitant.

"This is in all likelihood going to be an unpopular and potentially very short-lived government, given the real weaknesses going into it," said James Brown, a political science professor at Temple University Japan.

Meanwhile, opposition parties are exploring a joint candidate. Yuichiro Tamaki, leader of the populist Democratic Party for the People, has indicated readiness to challenge Takaichi.“I am prepared to serve as Prime Minister,” Tamaki said, noting support from the main opposition Constitutional Democratic Party.

What are the implications for Japan's economy and markets?

Sanae Takaichi's selection had initially boosted stock prices and weakened the yen, as investors anticipated continued implementation of Abenomics stimulus policies.

“With urgent policy challenges piling up at home and abroad and key diplomatic engagements imminent, political stability is indispensable,” said Yoshinobu Tsutsui, head of Japan's largest business lobby, Keidanren.

The yen strengthened by 0.5% to 152.38 per dollar following Komeito's withdrawal, reversing earlier losses that had pushed it to an eight-month low. Economists warn that any opposition-led government could unwind what has been called the“Takaichi trade”, driven by investor optimism about fiscal stimulus.

Could this shift Japan's diplomatic engagements?

Political instability arrives ahead of several important diplomatic events, including multilateral summits in Malaysia and South Korea, and a visit by US President Donald Trump expected later this month. Analysts suggest that a fractured coalition could complicate Japan's international commitments.

Komeito's Secretary General Makoto Nishida emphasised the party's vision for centrist, reform-oriented politics, signalling a potential shift in Japan's postwar political landscape.

“Japan has entered an era of the multi-party system,” Nishida said, noting that the party will now strive to become“the axis of centrist, reform-oriented political forces.”

MENAFN11102025007365015876ID1110181283