Commentary: Takaichi’s Landslide Won Power — Can It Win Prosperity?

1. In the winter, Japan held a Lower House election that resulted in a landslide victory for the ruling Liberal Democratic Party (LDP), led by Prime Minister Sanae Takaichi, and its coalition partner, the Japan Innovation Party. This win restored the LDP’s dominance and ended years of political instability in Tokyo characterized by a rapid turnover of prime ministers. Takaichi now holds a strong mandate to implement reforms, but questions remain about her ability to revitalize Japan's long-struggling economy. [para. 1][para. 2]

2. The source of Japan’s economic malaise is the “three lost decades” following the asset bubble collapse in the 1990s. These decades have brought persistent structural weaknesses, including stagnant real wages, an entrenched deflationary mindset, and a worsening demographic crisis marked by a shrinking and aging population. More recently, global inflation and a weak yen have deteriorated the purchasing power of Japanese households, threatening social stability as the middle class feels the economic squeeze. [para. 3]

3. Takaichi’s campaign capitalized on Japanese anxieties stemming from regional security threats—including China, Russia, and North Korea—by promoting her vision of a “rich and strong Japan.” While this appealed to voters’ need for security amid turbulence, it remains uncertain whether her ambitions can be translated into actual economic revival. [para. 4]

4. Takaichi’s economic strategy, dubbed “Takaichi-nomics,” is based on four major pillars: First, a “responsible active fiscal policy,” which involves targeted government spending, such as cutting gasoline taxes and increasing SME tax breaks, with Takaichi arguing that Japan’s net debt level (excluding government-held assets) leaves room for further borrowing. Second, integrating national security and economic growth by promoting defense and technology as key industries, bolstering supply chain resilience, and aiming for self-sufficiency in areas like semiconductors and small reactors. Third, recalibrating international economic policy to balance protections for critical technologies with engagement in global economic diplomacy, especially significant amid U.S.-China tensions. Fourth, revitalizing the domestic microeconomy through regional development, tourism, and social safety nets, especially targeting rural distress and elder care. [para. 5][para. 6][para. 7][para. 8]

5. Takaichi’s decision to dissolve the Lower House to secure her political position was risky but successful; she now has enough political capital to push conservative reforms reminiscent of her mentor Shinzo Abe’s policies. However, Japan’s economic rigidity—manifested in conservative corporate cultures, slow decision-making, and workforce shortages—limits the immediate impact of her mandate. Takaichi’s readiness to issue more government debt brings market scrutiny, as Japan’s overall debt remains over 260% of GDP, risking fiscal instability in a higher interest rate environment. Further, her security-driven economics threaten friction with export-heavy Japanese industry, and her conservative stances could create tension with the public on issues like militarization and immigration. [para. 9][para. 10][para. 11][para. 12][para. 13][para. 14]

6. Parallels are often drawn between Takaichi and Shinzo Abe, whose “Abenomics” relied on monetary easing, fiscal stimulus, and structural reform but fell short of delivering wage growth. Takaichi’s approach adds a stronger security focus to this legacy. Her landslide election win may allow her the longevity needed to enact change, potentially restoring policy stability—which has been lacking due to frequent prime ministerial turnover—and fostering investor confidence. If her policies can end Japan’s deflationary spiral and revitalize key sectors, especially tech, Takaichi’s success will hinge on rebuilding public and market confidence. Ultimately, her leadership offers Japan a chance at renewal, but overcoming entrenched problems will be an ongoing challenge. [para. 15][para. 16][para. 17][para. 18][para. 19][para. 20]