Last week's 70th anniversary of Japan's atomic bombing was a stark reminder of war's consequences for citizens criticizing Prime Minister Shinzo Abe for what they fear could be a return of military aggression.
For the first time since Abe came to power in December 2012, more people disapprove of his cabinet than support it, according to local media polls in recent weeks. A key reason behind the wane in popularity is Abe's proposal of two controversial security bills that could effectively end Japan's pacifist era. Now, experts are questioning whether those sinking ratings could cost him the title of prime minister.
"Mr. Abe's most pressing challenge is to secure re-election this September as president of the Liberal Democratic Party (LDP). Whether the race will be uncontested depends on whether the prime minister's approval rating continues to deteriorate over the coming weeks," HSBC economist Izumi Devalier said in a report on Thursday.
The role of LDP leader—a position that comes up for election on September 20th—tends to be synonymous with the position of prime minister because the party enjoys absolute dominance in Japan thanks to the absence of a strong opposition party.
Abe's approval rating stood at 41 percent in July, according to a poll by national broadcaster NHK, while a similar survey by newspaper Mainichi indicated a 35 percent reading. Should ratings drop to 30 percent and below, he will likely face a challenger in the LDP race, according to Devalier.
If an LDP rival does challenge Abe, it will also create uncertainty over the election outcome and result in reduced equity inflows by overseas investors into Japanese equities, she added, pointing to historical evidence that shows inflows rising in anticipation of a regime change and falling as a Japanese prime minister enters the declining phase of their leadership.
All this is a new situation for Abe—the mastermind behind Japan's three-year-old economic drive to exit a 20-year old deflationary spiral—who has largely been well-liked throughout his tenure.
"Can there be Abenomics without Shinzo Abe? This is a question that investors have been asking increasingly over the past few weeks," said Devalier.