Sanae Takaichi’s rise as Japan’s first female prime minister marks a historic moment for the country and the ruling Liberal Democratic Party (LDP), but one overshadowed by political fragility and economic uncertainty.
After winning the Diet vote with the backing of the right-leaning Japan Innovation Party, Takaichi inherits a divided mandate, a skeptical electorate and markets braced for volatility.
“Within the LDP, she benefited from being seen as the protégé of former Prime Minister Shinzo Abe,” says Tina Burrett, professor of political science at Sophia University, Tokyo.
“Although Abe’s faction has dissolved, its former members were the backbone of her leadership campaign.”
Yet, Burrett notes, “like Koizumi Junichiro, she’s taking over at a time when the LDP is unpopular. The party is more willing to take a chance on a maverick candidate when there isn’t much to lose.” Koizumi served as Prime Minister from 2001 to 2006.
Takaichi faces a geopolitical balancing act. A self-professed admirer of Margaret Thatcher, she has pledged to double defense spending to 2% of GDP by March and push constitutional reform, moves that could strain ties with neighbors wary of Japan’s militarist past.
“Much will depend on whether she governs as hawkishly as she campaigned,” Burrett observes. “Her mentor Abe was more hawkish in opposition than in government. It’s possible she will moderate her position on China, for example.”
Markets are watching closely. The Nikkei 225 initially surged on expectations of stimulus but has since fluctuated amid uncertainty over fiscal discipline.
Takaichi’s first major initiative, a stimulus package reportedly exceeding 13.9 trillion yen (about $92 billion), reflects her commitment to a proactive fiscal policy. Yet her advocacy of aggressive spending sits uneasily with her pledge to curb inflation.
For Japan watchers, the early signals are mixed. Government bond yields have risen, the yen has weakened, and equity markets remain sensitive to hints of policy continuity or deviation. Takaichi’s central challenge will be reconciling her nationalist ambitions with the need to maintain market confidence, a test that will determine not only her political survival, but also Japan’s economic trajectory.
