The most significant threat to a political ideology comes not from the opposing party, but from the 'lunatics' on its own side. These extreme factions can make the entire group appear foolish and unreasonable, doing more damage to their credibility than any opponent ever could.

When a political movement is out of power, it's easy to unify against a common opponent. Once they gain power and become the establishment, internal disagreements surface, leading to factions and infighting as they debate the group's future direction.

The BC Conservative Party's rapid rise was followed by an equally rapid collapse. In a bid for mainstream electability, its leadership recruited candidates from a collapsing centre-right party. This created a caucus of "dogs and cats" with fundamentally opposed views on cultural issues, leading to infighting and paralysis.

Traditional center-left parties are losing influence because they lack a coherent agenda to address the modern drivers of voter discontent. Their continued focus on narrow economic solutions is ineffective against the powerful cultural, identity-based, and technological forces that are actually shaping politics and fueling populism.

To challenge the ruling LDP, Japan's mainstream center-left party has formed a new "centrist reform alliance" with Kometo, the LDP's former coalition partner. Kometo is a center-right party backed by a powerful lay Buddhist group, making this an unusual but potentially potent political realignment.

Japan's ruling LDP selected Takaichi Sanae, a leader with a brash, populist aesthetic, not to upend the system but to co-opt populist appeal. This strategy aims to fend off genuine anti-establishment challengers and re-establish the party's grip on power, demonstrating a novel approach to maintaining the status quo.

While a failure by Japan's ruling LDP to secure a majority could cause a short-term Yen rally, the medium-term bearish outlook is unchanged. Neither a new coalition nor the current party is likely to enforce fiscal discipline or prompt faster BOJ rate hikes, leaving fundamental weaknesses in place.

The medium-term bearish outlook for the Yen remains, as a landslide victory for the ruling LDP is largely priced in, while a loss of their majority could paradoxically be more negative. An opposition win could lead to greater fiscal expansion and political uncertainty, potentially weakening the yen more severely in the long run.

While Japan's new LDP leadership creates uncertainty, the fragmented political landscape makes it nearly impossible to assemble a large-scale fiscal package, like a consumption tax cut, before year-end. This temporary paralysis actually lowers the immediate risk of fiscally irresponsible policies that investors fear.