Japan's likely next prime minister wrestles coalition backlash

By Tamiyuki Kihara and John Geddie

Japan's likely next premier Sanae Takaichi is already facing criticism from her ruling party's long-time coalition partner, a rift that could delay or, in an extreme scenario, jeopardise her premiership.

Hardline conservative Takaichi, selected to head the ruling Liberal Democratic Party in a weekend vote, on Tuesday met with the leader of her party's moderate partner Komeito to discuss its concerns about some of her positions.

While Takaichi is expected to win approval in parliament to become Japan's first female premier later this month, it is not guaranteed as the ruling coalition does not have a majority.

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If the coalition splits, Takaichi may seek to broker alliances with other parties including the fiscally-expansionist Democratic Party for the People (DPP), further fraying investor nerves about one of the world's most indebted countries.

"Everybody does think that Takaichi probably has the upper hand," said Kei Okamura, managing director at asset manager Neuberger Berman in Tokyo. "It's just a matter of how big of a hand that is."

The yen hit an eight-month low against the U.S. dollar on Wednesday, a move some strategists attributed to the political hiatus and the prospect of a tie-up with the DPP, which advocates for tax cuts and easy monetary policy.

"This is a problem for those hoping for continued fiscal prudence," said Mizuho strategist Jordan Rochester.

A vote in parliament had been due to take place around October 15, but is likely to be pushed back as coalition talks rumble on, LDP sources said. U.S. President Donald Trump is expected to visit Japan at the end of the month.

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Komeito, a socially liberal party affiliated with a lay Buddhist organisation, has been in an alliance with the LDP since 1999, and is often seen as a brake on its more hawkish leanings like its step back from pacifism.

The party has criticised Takaichi's tough language on foreigners and visits to the Yasakuni Shrine - seen by neighbours as a symbol of Japan's past militarism. It also wants the LDP to take a tougher response to a fundraising scandal that has rocked the party.

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Komeito leader Tetsuo Saito told reporters he had raised these issues with Takaichi in talks that lasted around 90 minutes on Tuesday, but reached no conclusion.

More talks are expected over coming days, a Komeito official said.

Meanwhile, the main opposition Constitutional Democratic Party (CDP) has called for other parties to rally behind an alternative candidate for prime minister.

If that happens, the DPP's charismatic leader Yuichiro Tamaki would be a strong candidate, local media cited the CDP's secretary general, Jun Azumi, as saying on Wednesday.

Opposition parties can put forward their own candidates when parliament meets to vote on the next premier.

Any candidate who secures a simple majority in the first round wins approval. If not, a run-off poll follows between the two candidates with the most votes.

However, getting agreement between a disparate band of opposition parties to challenge Takaichi remains a remote possibility, political analysts say.

Takaichi "is almost nailed on", said Paul Nadeau, a political science associate professor at Temple University in Tokyo. "I don't see the opposition parties all agreeing on one single candidate."

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