Japan’s ruling Liberal Democratic Party (LDP) is in crisis over a political slush fund scandal, which erupted in December 2023. The scandal has plunged public trust in Prime Minister Fumio Kishida’s administration and the LDP to unprecedented lows and upended the LDP’s system of political factions. Kishida looks unlikely to survive beyond the end of his term as LDP leader in September 2024.

The scandal is about underreported income from political fundraising party tickets sold by LDP factions. Prosecutors estimate that at least 970 million yen (US$6.5 million) is involved over the five-year period between 2018 and 2022, mostly accrued by the former prime minister Shinzo Abe’s faction. A five-year statute of limitations means that earlier underreported income is not under investigation.

LDP faction members were typically set a quota of tickets to sell for each fundraising party based on their seniority. Profits beyond the quota were then returned to the member of parliament or put into a factional fund. While this is not illegal in itself, income from political fundraising parties carries restricted spending requirements and must be declared in accordance with the law, including reporting any purchases more than 200,000 yen (US$1330) worth of tickets per year.

The existence of ‘hidden money’ was described by a former political staffer who worked for an Abe faction lawmaker for 30 years as ‘unavoidable’. He said that politicians needed to pay for things outside the scope of the Public Offices Election Act, such as banquets and bus tours for influential supporters from their electoral district. These practices have been criticised by the opposition as a form of illegal vote buying.

Kishida reshuffled his cabinet on 14 December 2023 to try to contain the damage, replacing Abe faction members in the cabinet and in state minister and parliamentary vice-minister positions. After providing five of the last eight LDP prime ministers and dominating the party and Japanese politics for the last quarter of a century, the Abe faction was purged from government and LDP leadership.

This reshuffle and the political repositioning had no effect on public opinion. A Mainichi Shimbun poll in mid-December saw Kishida’s cabinet approval rating drop to 16 per cent while his disapproval rating skyrocketed to 79 per cent. This was the highest disapproval rating recorded in the poll since it started in 1947.

The damage was compounded in January after prosecutors indicted ten people, including three Diet members from the Abe faction who received more than 30 million yen (US$200,000) each in unreported income, as well as political staffers and accountants from the Abe, Kishida and Nikai factions. The top leaders of the Abe faction were questioned by the police but have not yet faced prosecution.

Kishida then announced he would lead a 38-person political reform taskforce. The integrity of the taskforce was under question from the outset as it included ten members of the Abe faction, nine of whom received unreported income, something labelled by one LDP politician as a ‘black joke’.

The key battlelines in the taskforce were whether LDP factions should be disbanded and how rules related to political funding should be changed.

Former prime minister Yoshihide Suga led calls to abandon factions, while another former prime minister Taro Aso and LDP Secretary-General Toshimitsu Motegi, both also factional heads, opposed the move. With this deadlock, Kishida unilaterally announced that his own Kochikai faction would disband and left it up to other factions to decide their own fate. The Abe and Nikai factions followed suit and disbanded, while the Aso and Motegi factions declared they would continue as ‘policy groups’.

Kishida’s political reform taskforce published an interim report announcing a ban on political fundraising parties by policy groups, training for party members and accountants, stricter provisions for the expulsion of members who have been arrested or indicted and stricter disciplinary action against ministers of parliament whose accountants are arrested based on the LDP’s Code of Discipline.

But the taskforce fell very short of public expectations. Two polls in February showed public support rate for the Kishida cabinet at 16.9 per cent and 14 per cent.

Opposition parties are demanding explanations in political ethics committee meetings. But given these committees’ toothless powers, and since opposition parties remain weak and divided, the meetings have so far been limited to an exercise in political spectacle. A JNN poll after found 86 per cent of the public dissatisfied with the explanations to the ethics committee by Abe and Nikai faction leaders.

Kishida appears in an impossible position, trying to avoid alienating the LDP’s old guard who helped install him as prime minister while responding to public demands for substantial political reform.

An unpredictable race to replace Kishida is now gathering pace behind closed doors with Aso and Suga positioned as potential kingmakers.

Suga is said to be backing reform-minded candidates Digital Economy Minister Taro Kono, former Defence Minister Shigeru Ishiba and former Environment Minister Shinjiro Koizumi to cast off the LDP’s negative public image. Ishiba, who has run for the leadership four times before, is the public’s preferred choice for next prime minister but his unpopularity with other LDP members jeopardises his chances. Aso favours Foreign Minister Yoko Kamikawa and Motegi. While Kamikawa is gaining popularity, Motegi’s position as a faction leader is damaging to his public standing.

Whether factions are resurrected under a new banner or effectively abolished, and the seriousness with which political funding reforms are pursued, will very much depend on who wins the race to lead the post-Kishida administration.

Ben Ascione is Lecturer at the Graduate School of Asia-Pacific Studies, Waseda University.