Storyline Japan's new ruling coalition will contend with challenges, including how to curb inflation and repair the flawed political funding system after a high-profile slush fund scandal eroded public trust, a scholar said Monday. Sanae Takaichi, leader of Japan's ruling Liberal Democratic Party (LDP), was officially elected the country's prime minister on Tuesday after winning in both houses of parliament. On October 10, the LDP's long-time coalition partner, Komeito, announced that it would withdraw from their 26-year partnership over a political funding scandal that has dogged the ruling group for two years, leaving the ruling party to broker alliances with other parties such as the Japan Innovation Party (JIP). The LDP and JIP on Monday formally agreed to form a coalition government, with party leaders Sanae Takaichi and Hirofumi Yoshimura signing a written agreement, providing the LDP with the support it needs to remain in power. Yu Uchiyama, a professor of political science at the University of Tokyo, said that soaring prices and the political slush money issue still concern the people the most, and will be a major challenge facing the new coalition. Japan is facing high inflation concerns due to rising consumer prices outpacing wage growth, with a weak yen further increasing import costs for goods like food. Public dissatisfaction with the cost of living is at a near-record high. "The biggest public concern right now is rising prices. Therefore, the key is what countermeasures will be proposed to address rising prices. I believe this will be the top priority," said Uchiyama. The political funds scandal engulfing Japan's main ruling party emerged in mid-November of 2023 when prosecutors reportedly launched investigations into a criminal complaint accusing five LDP factions of underreporting their revenue from political fund-raising parties. The extra income has allegedly returned to some of the lawmakers as kickbacks. The scandal has plunged public trust in the LDP to unprecedented lows and upended the LDP's system of political factions. "Especially after the Komeito party withdrew from the ruling coalition due to this issue, the public will pay more attention to the issue of politics and money. Therefore, this will become a major challenge for the Takaichi government," said Uchiyama. Reducing the number of Diet seats has been a major topic in policy talks between the ruling Liberal Democratic Party and the Japan Innovation Party. The LDP basically agreed to reduce the number of seats in parliament, but the two parties clashed fiercely over the issue of political donations. "The Japan Innovation Party has consistently advocated for a ban on political donations from corporations and groups. If this policy were implemented, it would be a significant financial blow to the Liberal Democratic Party, as its revenue would be significantly reduced," said Uchiyama. Shotlist: Tokyo, Japan - Oct 21, 2025: 1. Various of Japan's National Diet building Tokyo, Japan - Oct 20, 2025: 2. SOUNDBITE (Japanese) Yu Uchiyama, professor of political science, University of Tokyo: "The biggest public concern right now is rising prices. Therefore, the key is what countermeasures will be proposed to address rising prices. I believe this will be the top priority." Tokyo, Japan - Oct 21, 2025: 3. Pedestrians Tokyo, Japan - Oct 20, 2025: 4. SOUNDBITE (Japanese) Yu Uchiyama, professor of political science, University of Tokyo: "Especially after the Komeito party withdrew from the ruling coalition due to this issue, the public will pay more attention to the issue of politics and money. Therefore, this will become a major challenge for the Takaichi government." FILE: Tokyo, Japan - 2024: 5. Various of Liberal Democratic Party building Tokyo, Japan - Oct 20, 2025: 6. SOUNDBITE (Japanese) Yu Uchiyama, professor of political science, University of Tokyo: "The Japan Innovation Party has consistently advocated for a ban on political donations from corporations and groups. If this policy were implemented, it would be a significant financial blow to the Liberal Democratic Party, as its revenue would be significantly reduced." Tokyo, Japan - Oct 21, 2025: 7. Various of traffic. [Restrictions : No access Chinese mainland]