The share prices in Tokyo have recently soared on the hopes that conservative Japanese lawmaker Sanae Takaichi, who was elected on Tuesday as the first woman ever to be made Japanese prime minister, will redouble the market-friendly policies, such as heavy spending on defense and low-cost credit.
The benchmark index of the Nikkei 225 share attracted nearly the most well-known sizable mark of 50,000, increasing 0.7 percent to 49,517.57.
A motorbike and heavy metal enthusiast, Takaichi has won a lower house parliamentary ballot with over 237 votes, which was more than the 233 votes needed to win the ballot. Therefore, the following is what can be anticipated of what has been termed “Sanaenomics:”
Top concerns are inflation and wages
Consumer price increases have gone beyond the 2 percent range that the Bank of Japan has set at 2.5 percent and 3 percent. Thus, the central bank is slowly increasing the rates to a long-standing point that is at or below zero.
The wage stays close to the levels as it was 30 years ago, only to reach the average level of 1997 in 2024. Meanwhile, the low rates have assisted in maintaining the Japanese yen as weak against the dollar, which has increased inflation, as most of what is consumed in Japan has to be imported.
Takaichi said to reporters after being elected as head of the ruling Liberal Democratic Party at the beginning of this month that “I want to focus first on dealing with rising consumer prices,” making her the next potential Prime Minister to succeed outgoing Prime Minister Shigeru Ishiba.
Takaichi has also stated that she does not want to increase interest rates. One of the reasons why share prices have been skyrocketing is the promise of the low-cost credit going on. It will, however, hamper the fight against inflation, as well as the fight to strengthen the Japanese yen by keeping the rates low.
Following her predecessors’ promises, Takaichi also made vows to provide a wage increase, but she did not state how she would carry out that.
Handling Japan’s demography
The population of Japan has long been on the decline and is aging very rapidly, causing a shortage of labor, which weakens the potential economic development of the country.
Though a staunch conservative in most social causes, Takaichi has indicated that she would prefer to offer tax credits to those corporations that offer child care centers to their workers and potential tax reductions to family expenditure on child care.
What exactly further can the government do with any leader to address the low birth rate, which is partially due to the financial hardships of raising and educating children when wages do not keep pace with inflation.
It is also indicative of an inconducive corporate culture towards a family-friendly work-life balance.
Following Shinzo Abe’s policies
Takaichi is supposed to follow the policies of her late predecessor, the former Prime Minister Shinzo Abe. Eventually, he resigned in 2020 and was assassinated in 2022.
His “Abenomics” policy involved handouts of cash and increasing government expenditures, even though the national debt is almost three times the economic value.
Similar to Abe, she is hawkish on defense. The political rise has led to massive share purchases of military-related firms like Mitsubishi Heavy Industries, Yaskawa Electric, and Japan Steel Works.
Takaichi will be compelled to establish friendly ties with the United States President Donald Trump, as Abe did, and reinforce Japan’s security relations with Washington. They are supposed to meet later this month.
Takaichi stated that Japan may reconsider its commitment of $550 billion to the Trump administration, which was part of a deal that had aided in cutting U.S. tariffs on Japanese-made imports.
She subsequently indicated that she would abide by the deal, even though people disapproved of the money transfer to Washington, at the expense of Japanese taxpayers.
Takaichi will be dealing with issues that have baffled the Japanese leadership over the decades. Any significant changes would be met with the opposition of vested interests.
Japanese prime ministers have both short-term tenures and are also susceptible to intrigues amongst party members and the hereditary political fiefdoms that dominate the majority of seats in parliament.
The Liberal Democrats entrusted to securing the parliamentary victory on Tuesday, a vote that is considered a referendum by becoming allied to the Japan Innovation Party, a libertarian opposition party based in Osaka.
However, Takiichi must probably require the backing of legislators of other parties in the fractious and splintered opposition to pass legislation. They run across the board with the Japan Communist Party on the far left to the Sanseito and others on the far right.
Takaya Suzuki, the owner of a restaurant and real estate company, contributes to one of the minor nationalist-oriented opposition parties, the name of which is The Conservative Party of Japan, the policies of which are similar to Takaichi’s. He admires Trump and says he’s rooting for Takaichi.
Meanwhile, he added, “Even if she tries her best, it’s going to be tough.”
