(Bloomberg) -- Japan’s Prime Minister Shigeru Ishiba will seek to shore up support for his minority government with the opening of parliament on Friday, as he aims to pass a record ¥115.5 trillion ($738 billion) annual budget and navigate ties with the new US administration.
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Since ceding seats in a general election last October, Ishiba’s coalition government has been forced to negotiate with smaller opposition parties to try and secure enough support to pass a budget for the fiscal year starting in April.
Ishiba is also aiming to make a trip to the US in early February to hold talks with President Donald Trump amid the prospect that Japan may get caught up in another global trade war over tariffs.
It’s a critical period for the prime minister, who faces sliding public approval ratings and needs to look ahead to an upper house election in July, where the economy and inflation are likely to be topics on voters’ minds.
An expected interest rate hike by the Bank of Japan on Friday would be another sign that mild inflation is here to stay along with the likelihood of more expensive housing loans. A government survey released last week showed that over 70% of respondents were unhappy with rises in prices.
As part of the opening of parliament, Ishiba will deliver a speech on Friday afternoon to lay out his policy goals, including his ambition to spread economic development across Japan’s poorer rural areas, and ensure there’s a sustained rise in wages.
Before the summer election, a key test of Ishiba’s leadership will be his ability to reach an agreement with one of the opposition parties to pass the budget before the end of March. One sticking point has been the level of a new ceiling on tax-free income.
The small opposition Democratic Party for the People wants a much higher ceiling than the Liberal Democratic Party-led coalition is currently offering in return for support for the national budget.
While the DPP supported an earlier spending package and extra budget in return for a commitment to raise the ceiling, Ishiba’s coalition is concerned about giving too much ground for a measure the Finance Ministry claims could cost up to ¥8 trillion ($50 billion) in lost tax revenue.
The prolonged disagreement over those plans has opened the possibility for Ishiba to try and seek support from the Japan Innovation Party. The ruling bloc has promised to consider some of the Osaka-based party’s proposals, including making high school education free for all students.