TOKYO -- The last time the yen fell past 136 to the dollar was 24 years ago, in 1998. Just like this year, Japan held an upper house election in the summer.
Based on various exit polls, it was clear by the early afternoon of election day, July 12, that the ruling Liberal Democratic Party was headed to defeat, setting in motion a rapid party shake-up.
Prime Minister Ryutaro Hashimoto announced his resignation that night, as did LDP Secretary-General Koichi Kato, taking responsibility for the party's crushing loss.
Japan was facing a soft yen following the Asian financial crisis the year before. Hashimoto had commented about being tempted to sell U.S. Treasurys to shore up ailing banks, stoking concerns over rising U.S. yields. The Dow Jones Industrial Average went on to log its biggest drop since Black Monday of 1987.
The LDP's defeat was blamed partly on Hashimoto's mixed messages regarding tax cuts. But nobody saw the defeat coming. Polling ahead of the vote had pointed to a win for the party. What the polls failed to predict was a 14-point surge in turnout, to 58.84%, in a major boost to the opposition.
Increased turnout means that voters who had previously stayed home made their way to the polling sites. Trends among younger generations, which are less likely to vote, are watched especially closely.
A woman walks past campaign posters for the July 10 upper house election in Tokyo. © Reuters During the lower house race in 2021, most polls predicted that the victory line for the ruling coalition would be maintaining its majority. But in reality, the LDP did much better, winning enough seats on its own to control every committee in the house.
The discrepancy was seen as a result of polling methods. Because of staffing constraints due to the coronavirus, polls relied more heavily on automated phone surveys. People frustrated with the current government were more likely to respond to an automated voice, the postmortem analysis went.
Exit polls also missed the mark. Most media outlets predict the outcome at around 8 p.m. based on data collected through the late afternoon. This means that they tend to account for seniors, who typically vote in the morning, but underrepresent younger voters, who typically do so toward the end of the day.
Younger Japanese voters have grown more conservative over the last decade. Since Shinzo Abe began his second stint as prime minister in 2012, the LDP has received a higher percentage of youth votes than middle-aged and senior votes in national elections.
Unlike in 1998, greater interest among younger generations will not necessarily help the opposition in the upcoming election.
Economic conditions surrounding Japan have changed dramatically over the last 24 years or so. Monetary easing in the U.S. had strengthened the yen by the autumn of 1998. Today, U.S. rate hikes are pushing the yen to historic lows.
Japan was also on the cusp of entering deflation in 1998, while it faces rising prices today. The Russian invasion of Ukraine is driving up global prices of commodities and grains. With no end to the war in sight, Russian President Vladimir Putin looms large over the global economy's fate.