Who is Sanae Takaichi? The first woman set to helm the Japanese government

Japan
Source: CNBCPublished: 10/06/2025, 02:45:00 EDT
Sanae Takaichi
Abenomics
Japanese Politics
Bank of Japan
US-Japan Relations
Geopolitics
Who is Sanae Takaichi? The first woman set to helm the Japanese government

News Summary

Sanae Takaichi has won the presidency of Japan’s ruling Liberal Democratic Party (LDP) and is on the verge of becoming the country’s first female prime minister. A hardline conservative and close ally of the late Shinzo Abe, her ascent comes at a time of domestic economic strain and tense international relations. Takaichi's victory follows Prime Minister Shigeru Ishiba's resignation after the LDP lost its majority in both houses of parliament in 2024 and 2025, relegating it to minority governance. This means she will likely need opposition support for her confirmation as prime minister in the Diet on October 15, though analysts see this risk as low. Takaichi is a proponent of “Abenomics 2.0,” advocating loose monetary policy, fiscal spending, and structural reforms. She has criticized the Bank of Japan’s plans to raise interest rates, despite the BOJ having ended its negative interest rate regime in March 2024 and most recently keeping rates at 0.5%. Analysts suggest she was chosen for her ability to navigate relations with U.S. President Donald Trump, even as she reportedly expressed misgivings about the U.S.-Japan trade deal and suggested a “do-over” of Japan’s $550 billion investment pledge. She advocates a hardline stance towards China, favors revising Japan’s pacifist constitution (Article 9), and is considered friendly toward Taiwan. Her past visits to the controversial Yasukuni Shrine have drawn criticism from China and South Korea. While Citi analysts forecast a near-term rally for the Nikkei 225, they caution that Japanese equities are not undervalued, with the Topix 12-month forward price-to-earnings ratio nearing a historic peak. Consumer, defense, and export-sensitive stocks are expected to benefit under a Takaichi government, while finance and real estate stocks could face headwinds.

Background

Sanae Takaichi, a prominent figure in Japan’s Liberal Democratic Party (LDP), is a staunch conservative and a close associate of former Prime Minister Shinzo Abe. Her political lineage and policy leanings are deeply rooted in Abe's nationalist and economic agendas. The LDP, Japan's dominant political party for most of its post-war history, recently suffered significant electoral setbacks in 2024 and 2025, leading to Prime Minister Shigeru Ishiba's resignation and the party losing its parliamentary majority. This necessitates Takaichi forming a coalition or securing opposition support to effectively govern. “Abenomics,” Shinzo Abe's signature economic policy, aimed to combat deflation through "three arrows": aggressive monetary easing, flexible fiscal policy, and structural reforms. Takaichi's embrace of "Abenomics 2.0" signals a continuation of these strategies, particularly loose monetary policy, which contrasts with the Bank of Japan's recent steps to normalize interest rates. Meanwhile, US President Donald Trump, re-elected in 2024, continues to pursue an "America First" trade agenda, placing potential renegotiation pressure on US-Japan trade relations.

In-Depth AI Insights

What are the main risks and opportunities for Sanae Takaichi's "Abenomics 2.0" in the current environment? - Risks: Against a backdrop of global inflationary pressures and the Bank of Japan (BOJ) having begun monetary tightening, Takaichi's advocacy for loose monetary policy could clash with the BOJ's independence goals, introducing market uncertainty. - Furthermore, excessive fiscal spending could exacerbate Japan's already massive public debt, posing long-term risks to fiscal sustainability. - A further weakening of the yen could drive up import costs, intensifying the cost-of-living crisis, which contradicts her pledge to alleviate public anxieties. - Opportunities: If effectively combined with fiscal stimulus and targeted structural reforms, it could boost economic growth in the short term, particularly in key sectors like defense and exports. - Continuing the "Abenomics" policy framework could, to some extent, maintain market expectations for stability in Japan's economic policy. Given the Trump administration's "America First" policy, what are the deeper implications of Sanae Takaichi's hardline diplomatic stance for US-Japan relations and regional security? - US Relations: Takaichi's readiness for a "do-over" on the US-Japan trade deal could escalate trade friction with the Trump administration. While seen as "the best option to face off with Trump," this likely implies more confrontational negotiations rather than simple acquiescence, potentially leading to significant adjustments in trade terms and creating uncertainty for Japan's export-oriented economy. - Regional Security: Her proposals to revise the pacifist constitution and take a hardline stance on China will strengthen Japan's military presence and regional influence. While this might be welcomed by some US hawks, it risks intensifying tensions with China and South Korea, fueling a regional arms race, and increasing geopolitical risks. The strengthening of Japan-Taiwan relations will also further provoke Beijing's sensitivities. With the LDP losing its majority and Takaichi needing opposition support, what does this imply for her policy agenda and governmental stability? - Policy Compromise: Takaichi's hardline conservative agenda, such as constitutional revision and certain economic policies, may require significant compromise to secure opposition support. This could lead to the dilution or delay of her core policies, impacting her governing effectiveness and reform capabilities. - Governmental Fragility: A minority government inherently lacks stability, and any policy initiative could face obstruction from opposition parties. This might lead to frequent political stalemates and potentially even snap elections, introducing persistent political uncertainty for investors. - Market Impact: Policy uncertainty and the potential fragility of the government could dampen investor confidence, particularly in areas requiring long-term stable policy support, such as structural reforms and fiscal consolidation.