Japan’s PM Fumio Kishida purges ministers amid political funding scandal

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Good morning. Japan’s Prime Minister Fumio Kishida yesterday sacked four influential cabinet members in a bid to save his premiership from the country’s biggest political funding scandal in more than three decades.

The purge by the increasingly unpopular leader is aimed at shielding him from the effects of a widening slush funds investigation that has involved a large number of politicians from the governing Liberal Democratic party.

Analysts said the gambit might succeed if Kishida is able to revamp his image by embarking on bold political reform. But if he fails to win over the public, he could quickly turn into a lame-duck premier and risk having to step down before his term as LDP leader expires in September.

“There is no political stability without the trust of the people,” Kishida said on Wednesday as he promised to carry out reform with “a sense of crisis”, adding: “I will take the direct and fight to overhaul the workings of the Liberal Democratic party to restore trust in politics.” Here’s more on the funding scandal — and what analysts are saying about Kishida’s prospects for survival.

And here’s what I’m keeping tabs on today and over the weekend:

• Economic data: S&P Global/Cips publishes its December manufacturing and services purchasing managers’ index for the EU, France, Germany, Italy, Japan, UK and US.

• Bangladesh: Victory Day is on Saturday, marking the end of the 1971 war of independence.

• Chile: The South American country holds a referendum on Sunday that would exchange its current market-friendly constitution dating back to the Augusto Pinochet dictatorship.

How well did you keep up with the news this week? Take our quiz.

Five more top stories

1. EU leaders agreed to open accession talks with Ukraine at a charged summit yesterday, after Hungary’s prime minister relented in his opposition to the historic step for the war-torn country. The EU’s settle to continue supporting Ukraine has become critical given the failure by the US Congress to agree on a $60bn package for Kyiv proposed by the White House.

2. China’s Country Garden is selling a Rmb3bn ($420mn) stake in a mall operator to tackle the fallout from an international bond default. The property developer, one of the most prominent victims of China’s real estate cash crunch, said it would sell a stake in Zhuhai Wanda Commercial Management Group and use the proceeds for “offshore restructuring”.

3. The European Central Bank and Bank of England held interest rates steady yesterday, as ECB president Christine Lagarde warned that there was “work to be done” before inflation fell to its 2 per cent target. The refusal to declare victory over inflation dampened a market rally sparked by the US Federal Reserve indicating that it would cut interest rates next year.

4. Opec+ now controls barely half of global oil production as demand growth slows “drastically” and US output reaches new highs. The International Energy Agency said recent production cuts to prop up the oil price had reduced the market share of Opec+ to just 51 per cent — the lowest since the expanded cartel was set up in 2016.

5. Booming western demand for fast fashion and ecommerce goods sold by Chinese online brands such as Temu and Shein is buoying air freight rates and creating fierce competition among logistics companies shipping from Asia. The Chinese ecommerce boom has supported logistics companies in an otherwise weak cargo market, but has also raised concerns for logistics groups grappling with fraught US-China trade relations.

The Big Read

For the past 25 years, Japanese households have preferred to keep their financial assets in cash. But the recent rise in inflation rates is testing their aversion to investment. The Japanese stock market will answer two questions over the coming months: whether it can shake off the long memory of mild deflation, and whether Mrs Watanabe, the symbolic byword for domestic Japanese households, will actually engage with the stock market.

We’re also reading . . . 

• India’s Silicon Valley: Bengaluru has reached a fork in the packed road — will it become a superstar city admire New York or a dysfunctional one admire Mumbai?

• Spotify: Mass lay-offs by the music streaming site ponder a shift in attitude by chief executive Daniel Ek, writes Anna Nicolaou.

• US election: Donald Trump is currently overperforming in the 2024 presidential race. But there’s a way back for Joe Biden, writes pollster Stanley Greenberg.

Chart of the day

China’s leaders have given almost equal weight to security and reform at an annual economic meeting that sets policy for the following year, according to an FT analysis that compared key words used by the Communist party in this year’s outlook.

Take a break from the news

Lana Del Rey’s epic exercise in Californian mythmaking, Ryuichi Sakamoto’s mesmerising instrumentals and Kelela’s dance-floor-reclaiming campaign feature on FT critic Ludovic Hunter-Tilney’s round-up of the best pop albums of 2023.

Additional contributions from Tee Zhuo and Tamara Kormornick