IMAGE: TJT
A POLITICAL CHANGING of the guard is under way in Japan. On October 21st Sanae Takaichi was elected prime minister, becoming the first woman to lead the country. Her ascent was immediately cheered by financial markets, with the Nikkei 225 stock index surging to a record high. Yet the optimism on trading floors belies a more consequential shift. Japan’s long-stable political order is fracturing, ushering in a new era of nationalist sentiment and economic experimentation.
Ms Takaichi’s rise was made possible by the collapse of the ruling Liberal Democratic Party’s (LDP) coalition with Komeito, a centrist party that had tempered its partner’s hawkish instincts. To retain a parliamentary majority, the LDP has instead joined forces with the Japan Innovation Party, a reformist, centre-right group. This new alliance signals a rightward lurch. Both parties share a commitment to stronger defence, a revival of nuclear energy and a more assertive brand of conservatism. The placid, consensus-driven politics of post-war Japan are receding.
The LDP’s calculation is one of pre-emption. Faced with declining support and the rise of populist rivals, it has chosen a leader who can channel public frustration without upending the establishment. Ms Takaichi is no radical insurgent. She is, however, a stark departure from the grey-suited bureaucrats who have long dominated Japanese public life. A former drummer in a heavy-metal band who still carries her sticks in her handbag, she embodies a generational and stylistic break. Her political creed is one of conviction, not caution.
That creed was shaped by her political mentor, Shinzo Abe, Japan’s longest-serving modern prime minister who was assassinated in 2022. Ms Takaichi is his ideological heir. She shares his goal of revising the country’s pacifist constitution to permit a more robust military, and his desire to shed what conservatives see as the legacy of post-war defeatism. Yet she takes these positions further. She has defended Japan’s wartime record and visited the Yasukuni Shrine, which honours war criminals among the dead—acts that infuriate neighbours such as China and South Korea. Her tenure may complicate regional diplomacy at a time of rising threats.
Investors, for now, are focused on the domestic agenda. The “Takaichi trade” is driven by expectations of higher defence spending, business-friendly tax cuts and a push to restart nuclear reactors. She promises to continue Abenomics, the economic programme of her predecessor, but with a distinct emphasis. Rather than deep structural reform, she favours state-guided investment in strategic areas like semiconductors and energy. It is a form of Keynesianism with a nationalist heart.
This approach is not without risks. Japan’s inflation has remained above the central bank’s 2% target for three years, squeezing household budgets. The yen has weakened considerably, reflecting market worries over loose fiscal policy and its consequences. The stockmarket’s rally may yet be tempered by macroeconomic reality.
Meanwhile, as Japan’s first female leader, Ms Takaichi shatters one glass ceiling. Yet she leads a country ranked 125th in global gender equality and opposes reforms such as allowing married couples to retain separate surnames, which most Japanese support. Her vision of womanhood is traditional, centred on family and national pride. Nevertheless, she is expected to appoint a record number of women to her cabinet, modernising the LDP’s image even as she clings to conservative social values.
But her political footing remains precarious. The new coalition is untested; relations with former partners are strained. Within her own party, many moderates view her as too ideological. To govern successfully she must emulate Mr Abe’s later pragmatism, tempering fiery rhetoric with strategic calculation. The heavy-metal drums may need to be played at a lower volume.
Japan’s political transformation reflects a global trend: the appeal of strong-willed leaders who blend nostalgia, nationalism and charisma. For a nation weary of economic stagnation and technocratic management, Ms Takaichi offers fire and conviction. Whether that energy revitalises Japan or consumes it is the question that will define her premiership. The markets are betting on revival. History will be the judge. ■