MNI POLICY: PM Abe Health Eyed; Impact On BOJ Kuroda A Concern

With the health of Japanese Prime Minister Shinzo Abe again headline news following a second hospital visit within a week, speculation is mounting over whether he will resign his office, triggering a succession battle amongst his lieutenants.

Prime Minister Abe, Japan's longest-serving civilian leader, has seen had overseen a period of steady economic growth, which has been undermined by the severe economic downturn triggered by the global pandemic.

His current term as president of the ruling Liberal Democratic Party is set to run through September 2021 and he still plans to spend his remaining time in office fighting the coronavirus.

CANDIDATES

There are a string of candidates who could succeed Abe at the head of the LDP.

Fumio Kishida, a former foreign minister and the current chair of the party's powerful Policy Research Council, is the main candidate to be the next party head, although some support has ebbed away after a Kishida-backed proposal to provide JPY300,000 to certain households in response to the pandemic fizzled out.

Shigeru Ishiba, a former defense minister and LDP secretary-general, was once a top choice to succeed Abe. Ishiba, a vocal Abe critic, has seen his support rise as disapproval of the administration has grown.

Chief Cabinet Secretary Yoshihide Suga is seen as one of the leading candidates to succeed Abe. Suga has served as the senior government spokesman since December 2012, when Abe returned to power. Suga has said that the coronavirus pandemic has taught Japan a crucial lesson on the perils of relying too much on China for key supplies from masks to car parts.

IMPACT ON BOJ POLICY

One question further for financial markets is whether an Abe resignation results in the resignation of the BOJ Governor Haruhiko Kuroda, as the governor was appointed and reconfirmed by the PM, who has been fully supportive of the central bank's policies.

In answer, it appears unlikely that Kuroda would resign following an Abe departure, as doing so would look like undermining the BOJ's independence from the political system.

Alongside that, there are fears inside the BOJ that Kuroda stepping down could trigger market speculation that the central banks will abandon its 2% price target, strengthen the yen and see lower stock prices.

Finding the successor to Kuroda would be a difficult job for a government with a new head and devoting all its time to fighting the spread of coronavirus and the economic fallout, although insiders suggest BOJ Deputy Governor Masayoshi Amamiya, a career bank official, would be seen as one of the leading candidates to succeed Kuroda.