Ishiba stays on as Japan PM; pledges $65bn semiconductor/AI support

SINGAPORE (ICIS)–Japan’s Prime Minister Shigeru Ishiba will remain in his post following a snap election, despite the setback suffered by his Liberal Democratic Party, which lost majority control of parliament in October.

• Support for semiconductors meant to capitalize on demand, provide cushion against geopolitical shocks
• Japan Oct consumer prices up 1.8% year on year
• Central bank may hike interest rate to meet inflation target

Ishiba secured 221 votes of the 465-seat lower house, winning the 11 November elections to remain as Japan’s head of government.

He won against former Prime Minister Yoshihiko Noda who is the leader of the opposition Constitutional Democratic Party.

Upon winning, Ishiba pledged more than yen (Y) 10 trillion ($65 billion) in support of Japan’s semiconductor and artificial intelligence (AI) sector by fiscal year 2030 amid geopolitical risks and trade shocks, notably between the US and China.

Having a strong domestic semiconductor industry would loosen Japan’s reliance on imports and meet rising demand overseas.

The plan includes proposed legislations to support mass production of next-generation chips, with beneficiaries including Japanese semiconductor company Rapidus, headquartered in the northern Japanese city of Hokkaido, according to Reuters.

In 2023, Japan had unveiled a Y2 trillion plan to support its domestic chip industry as the AI boom was fueling demand.

POLICY INTEREST RATE HIKE POSSIBLE
Meanwhile, Ishiba also unveiled cash handouts to help low-income households with disaster preparedness and deal with higher prices.

Household spending in October dropped by 1.1% year on year, according to data from the Ministry of Internal Affairs.

Core consumer prices for the month increased by 1.8% over the same period, official data showed.

Eyes will be on the Bank of Japan (BoJ) meeting on 18 and 19 December, with an interest rate hike possible amid strong downward pressure on the Japanese yen.

At 08:00 GMT, the yen was trading at Y153.83 against the US dollar on Tuesday.

The recent strength of the US dollar followed the re-election of Donald Trump as US president.

Trump is pushing for imposition of more tariffs on foreign goods entering the world’s biggest economy.

A weaker yen supports exports but discourages imports.

The BoJ is expected to hike its policy rates from 0.25%, in line with its target to keep inflation at 2% for 2024, Japan securities firm Nomura in a research note on 8 November.

“We believe… events will pave the way to a virtuous cycle between wages and prices, leading to the BoJ hiking the policy rate in December 2024,” Nomura said.

Focus article by Jonathan Yee

($1 = Y153.83)