(Bloomberg) — Japan appears poised for one of its closest national elections in years as voters go to the polls Sunday to decide whether to keep the scandal-ridden Liberal Democratic Party in power.

Japanese media forecasts suggest the LDP will win the largest number of votes but could lose its overall majority in the lower house of parliament, and perhaps even control of the government with its coalition partner, Komeito. In the latter scenario, the LDP might still be able to cling to power with the help of other friendly lawmakers or by bringing another party into the coalition.

A change of government is a more distant possibility, according to forecasts, but almost any plausible outcome will result in a weakening of the administration, putting Prime Minister Shigeru Ishiba on the sidelines less than a month after he became leader national.

At the heart of voter discontent with the ruling party are revelations last year that LDP lawmakers were lining their pockets by hiding revenue generated at fundraising events. While dozens of LDP politicians have been punished by the LDP and many powerful groups within the party have been dissolved, opinion polls indicate that many voters believe the response has been insufficient.

Voter anxiety is being amplified by the highest inflation in decades, a factor that has weighed on household purchasing power despite a slight increase in wage growth.

A setback at the ballot box would likely make it more difficult for Ishiba to pursue his policy goals, including increasing funding for regional growth and raising taxes to finance increased defense spending. A setback could force Ishiba to take more populist measures, such as additional social spending or even tax cuts.

Ishiba has already pledged to make the next economic stimulus package bigger than last year’s, which was financed by an additional 13 trillion yen ($86 billion) budget requiring the issuance of more public debt.

The yen and Japanese stocks could come under pressure from the emergence of a more fragile LDP-led government after the election, strategists say, while parties opposing Bank of Japan rate hikes could be encouraged to express yourself.

“If Ishiba is weakened, it could be significant given that there are strong opinions within the LDP on BoJ policy, such as those of Sanae Takaichi,” said Jeff Young, founder of DeepMacro-based consultancy in New York, who worked as a financial advisor. economist for Japan at Salomon Brothers in the 1990s.

Takaichi narrowly lost to Ishiba in party leadership elections last month after campaigning on a fiscal and monetary stimulus package. During the campaign, she said it was “stupid” for the BoJ to raise interest rates.

The election pits Ishiba’s LDP against a divided set of opposition parties, the largest of which is the Constitutional Democratic Party led by former Prime Minister Yoshihiko Noda. The CDP is largely aligned with the LDP on the Japan-U.S. security alliance, as well as the need to alleviate the cost-of-living crisis and push wage growth above the ‘inflation.

The CDP could benefit from a protest vote over the ruling party’s slush fund scandal and gain support from progressives with strong views on issues such as the right to use separate surnames after marriage. These themes appear to have resonated more with the electorate than the CDP’s goal of reducing the central bank’s inflation target to “above zero” from 2 percent.

The LDP-Komeito coalition had a comfortable majority of 279 of Parliament’s 465 seats before the election, but voter anger over the funding scandal is expected to lead to sharp reductions in the number of seats. Ishiba has set a goal of reaching the minimum of 233 seats needed to maintain control of the lower house, the more powerful of the two houses of parliament, with Komeito.

Recent opinion polls suggest the coalition may fail to achieve that goal for the first time since it lost power in lower house elections in 2009. If that happens, Ishiba could turn to support PLD lawmakers who were not allowed to represent the party. in the election because of their role in the scandal that undermined public support.

Of the 12 LDP members deprived of official support in Ishiba’s election, 10 are running as independent candidates. The lawmakers include former Commerce Minister Koichi Hagiuda and former Education Minister Hakubun Shimomura, both of whom had influence within the party before news of the slush funds broke last year . Media forecasts suggest that a handful of candidates will win seats in the election.

Ishiba may also have to try to bring another party into the coalition if he still falls short of a majority. Before the election, centrist opposition parties said they might cooperate with the LDP on some policy issues, but none indicated they would be willing to join the coalition.

Most forecasts predict that the LDP will still be the largest party in parliament after the elections, making it unlikely that Noda’s CDP will be able to take control of the government by building its own coalition. The CDP is the successor to the party that governed Japan from 2009 to 2012, when the LDP last lost power.

–With help from Yoshiaki Nohara, Takaaki Iwabu and Isabel Reynolds.

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