UNCHARTED WATERS FOR JAPAN

Shigeru Ishiba and the Dual Mandate of National Renewal and Global Recalibration

Shigeru Ishiba’s elevation to the role of Prime Minister was met with cautious optimism by those of us who have long watched Japan struggle to overcome its deepening demographic, economic, and geopolitical challenges. Ishiba is not a populist, nor is he a master tactician of backroom politics—but he is a thinker, a policy realist, and perhaps the most substantively grounded leader Japan has had in decades. His premiership comes at a moment when the country desperately needs structural reform and strategic clarity. In this article, I offer my take on the scale of the challenges Ishiba faces, the seriousness of his agenda, and why his success—or failure—may ultimately determine whether Japan remains a leading power or drifts further into managed decline.

Image source: Government of Japan

As of mid-2025, Japan stands at a critical inflection point. The postwar economic miracle is a distant memory, replaced by profound structural challenges threatening its domestic vitality and global relevance. At the helm is Prime Minister Shigeru Ishiba, a veteran statesman known for rigorous policy expertise, sober leadership, and deep commitment to national security. His ascent marks a potential pivot in Japan’s political culture, offering substance-driven governance after years of factional intrigue and image-first politics. Yet, his inherited and emergent challenges are as daunting as any faced by a postwar leader. His tenure continues to be defined by a dual imperative: reviving Japan from within, while safeguarding its strategic position in a volatile Indo-Pacific.

The Domestic Mandate: Reviving a Nation in Demographic Decline

Japan’s demographic crisis is no longer a looming threat; it is a lived reality. One in three Japanese citizens is now aged 65 or older, with annual births falling below 700,000, leading to an unparalleled population contraction among major economies. This isn't just about pensions or elder care; it’s a full-spectrum societal shock, impacting labour, regional viability, military recruitment, and national morale.

Ishiba’s long-standing advocacy for regional revitalisation and local empowerment takes on renewed urgency. He understands Japan’s fate won't be decided in Tokyo alone, but in prefectures and townships hollowed out by outmigration and disinvestment. His administration is advancing a multilayered strategy: decentralising administration, enhancing digital infrastructure for remote work, subsidising relocations and startups in regional hubs, and offering housing incentives to young families.

However, structural inertia is formidable. Japan’s work culture remains hostile to dual-income households, urban-rural educational gaps deter youth mobility, and immigration, though slowly growing, is tightly controlled by cultural anxieties and bureaucratic constraints. To shift this trajectory, Ishiba must reframe the national conversation, moving beyond mere population numbers to define the kind of society Japan seeks in the 21st century.

Despite a stable macroeconomic environment, Japan has struggled with chronic underperformance in wages, productivity, and innovation. Real wages have stagnated for decades, and its once-vaunted manufacturing edge faces competitive threats from South Korea and Southeast Asia. Ishiba’s economic strategy aims to break this cycle through three pillars:

• Reindustrialisation via Innovation: Targeted investment in AI, robotics, biotech, and space technology to foster new industrial ecosystems. This includes revitalising national R&D agencies and reworking university-industry collaboration models.

• Support for SMEs and Local Enterprises: Recognising Japan’s economic backbone in its vast SME network, Ishiba prioritises access to finance, deregulation, and digital transformation for smaller firms.

• Labour Market Reform: Tackling overwork culture, gender disparity in career advancement, and employment rigidities. Policies include enhanced parental leave, corporate governance reforms promoting diversity, and vocational education for upskilling older workers.

Complicating these efforts is Japan’s staggering national debt, exceeding 260% of GDP. While domestic ownership of that debt mitigates immediate risk, it limits Ishiba’s fiscal options. Creative public-private partnerships, sovereign wealth fund models, and aggressive monetisation of state assets are under discussion to broaden fiscal headroom.

The Political Landscape: Leading Without a Strong Faction

Shigeru Ishiba’s political career is marked by independence from the LDP’s factional machinations. This has earned him respect but also created friction within the establishment. His ascent was due to shifting political winds, not factional consensus, shaping his governing style. To push difficult reforms, Ishiba must navigate treacherous LDP factionalism. While he enjoys a reputation for integrity and analytical rigour, his lack of a powerful support base makes him vulnerable to internal dissent. His leadership hinges on two strategies:

• Building Public Legitimacy: Directly engaging the public via town halls, digital platforms, and transparent policymaking to create bottom-up political momentum, pressuring reluctant party actors.

• Forming Cross-Factional Policy Coalitions: Cultivating issue-specific alliances across the LDP and reaching out to opposition parties on non-ideological grounds like defense, digitalisation, and child policy.

At stake is more than legislative success; it is the restoration of public trust in political leadership. After succession of scandals, Ishiba’s relatively clean reputation is both an asset and a benchmark he must uphold.

A Fractious Indo-Pacific: Strategic Clarity in an Age of Ambiguity

Japan’s relationship with China is defined by "managed mistrust". Bilateral trade remains robust, with China as Japan’s largest trading partner, but strategic rivalry is unmistakable. Chinese incursions around the Senkaku Islands, its military modernisation, and aggressive economic leverage have profoundly shifted Japanese strategic thinking. Under Ishiba, Japan is:

• Boosting Defense Readiness: Accelerating missile defense procurement, expanding cyber capabilities, and enhancing space and maritime surveillance.

• Reinterpreting Article 9: While formal constitutional revision remains elusive, Ishiba supports broader reinterpretations allowing collective self-defense and more flexible responses to regional contingencies.

• Strengthening Alliances and Partnerships: Beyond the U.S. alliance, Japan is deepening defense cooperation with the Philippines, India, Vietnam, and key NATO states. A new trilateral dialogue with the UK and Australia has been proposed for maritime security and emerging technologies coordination.

North Korea’s escalating missile tests and nuclear development continue to threaten Japanese security. Each launch over Japanese territory galvanises public opinion and validates Ishiba’s defense-forward posture. Diplomatic efforts remain vital, particularly for the unresolved abductee issue. Ishiba has appointed a special envoy and signaled openness to direct negotiations, possibly via backchannel diplomacy with neutral intermediaries. While breakthroughs are elusive, prioritising the issue is domestically powerful.

The Australia-Japan Axis: A Strategic Linchpin

Among Japan’s growing network of strategic partnerships, the bilateral relationship with Australia has emerged as a natural and necessary alliance.

Strategic Convergence and Defense Integration: The 2022 Reciprocal Access Agreement (RAA) laid the legal foundation for deeper defense cooperation. Under Ishiba, this evolves into a more operational partnership, with regular joint exercises in the South China Sea and Western Pacific , information-sharing protocols for cyber and maritime threats , and interoperability planning across disaster relief and contingency operations. Discussions are ongoing about how Japan might engage with AUKUS Pillar II technologies, particularly in undersea surveillance, AI-enabled targeting, and autonomous systems. While not seeking formal membership, Ishiba sees selective technological integration as vital for staying ahead of the threat curve.

Economic Resilience and Clean Energy Transition: Australia’s role in Japan’s energy matrix is shifting from fossil fuels to clean energy. Japanese investment in Australian hydrogen, ammonia, and solar infrastructure is accelerating, supported by long-term bilateral frameworks. Strategic agreements on rare earths and battery metals are also expanding. This partnership is not merely transactional; it is part of Ishiba’s broader push for economic security, defined as maintaining industrial sovereignty, technological leadership, and supply chain integrity amidst current global turbulence.

Social Connectivity and Long-Term Soft Power: People-to-people links such as student exchanges, scientific collaboration, diaspora connections – form the bedrock of long-term alignment. Ishiba has called for a "strategic opening" of educational pathways, including dual-degree programs, researcher mobility, and language initiatives. These efforts aim to build a more resilient bilateral ecosystem, less reliant on political leadership cycles and more anchored in shared civil society.

A Leadership Test for the Post-Heisei Generation

Prime Minister Shigeru Ishiba’s premiership is more than a policy experiment; it is a test of whether Japan can renew itself against profound internal and external pressure. His approach—characterised by seriousness over showmanship, long-term vision over short-term popularity, and principle over faction—may not appeal to every constituency. Yet, it offers a model of leadership sorely needed in an age of complexity. His success hinges on connecting strategy with execution—transforming diagnosis into action, and rallying a fragmented political class and weary public around a new sense of national purpose. If he succeeds, he will not only guide Japan through its demographic and geopolitical dilemmas but chart a new course for a post-industrial democracy confronting the headwinds of history. I am not confident it will succeed given the national reticence for change, but at least the guidelines are there.

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