A Symbolic Breakthrough with Substantive Questions
Japan has entered a new political era as Sanae Takaichi becomes the nation’s first female prime minister. Her leadership marks a symbolic breakthrough in a country long criticized for its gender imbalance in politics. Beyond symbolism, Takaichi’s policy stance on fiscal expansion, defense, and monetary easing may define Japan’s domestic and global economic direction in the years ahead.
Context: A Historic Political Shift
Takaichi secured 237 votes in the first round of parliamentary voting on October 21, 2025, avoiding a runoff in the 465-seat Lower House. Her ascension caps a remarkable journey through Japanese politics. The 64-year-old grew up in Nara near Osaka and rose from TV presenter to flag bearer of traditional and nationalist ideals.
A protege of assassinated former Prime Minister Shinzo Abe, Takaichi is expected to emulate his policies including a stronger military and economy, as well as revising Japan’s pacifist constitution. Her path to leadership was far from smooth. In the 2024 LDP presidential race, Takaichi lost to Shigeru Ishiba but won the party leadership in September 2025, defeating Agriculture Minister Shinjiro Koizumi after Ishiba announced his resignation.
The ruling Liberal Democratic Party allied with the Japan Innovation Party over the weekend to form a coalition government, with Takaichi agreeing to back JIP policies such as reductions in parliamentary seats, free high school education, and a two-year pause on food consumption tax. This partnership came after the Komeito party abruptly exited its alliance with the LDP on October 10, ending a relationship going back to 1999.
Policy Direction: Balancing Reform and Continuity
A hardline conservative, Takaichi has been widely labeled as an apostle of “Abenomics,” the economic strategy of late Prime Minister Shinzo Abe, which espoused loose monetary policy, fiscal spending, and structural reforms. Her economic philosophy centers on proactive government intervention to jumpstart growth.
During the 2024 LDP leadership race, she criticized the Bank of Japan’s plan to raise interest rates, although BOJ Governor Kazuo Ueda has said the central bank would set rates without any preconceptions. This tension between political preferences and central bank independence will be a defining feature of her premiership.
On defense and security, Takaichi supports a stronger military and maintaining the status quo in the Taiwan Strait. She has positioned herself as a China hawk, likely to pursue defense spending increases in line with Japan’s commitment to reach 2% of GDP.
Her cabinet reflects both continuity and historic firsts. Takaichi appointed Satsuki Katayama, a former Finance Ministry official and close ally, as Japan’s first female finance minister. However, with just two other women in her cabinet, the total falls well below the high of five in recent administrations. Other key appointments include Shinjiro Koizumi as defense minister and Toshimitsu Motegi as foreign minister.
Economic Implications: Markets React to “Abenomics 2.0”
Financial markets responded enthusiastically to Takaichi’s election. Japan’s Nikkei 225 index jumped over 4% to hit a record high following the LDP’s coalition agreement, closing at 47,944.76, with gains led by real estate, technology, and consumer cyclical stocks. Defense contractors saw particularly strong performance, with Yaskawa Electric jumping over 20%, Japan Steel Works up 14%, and Mitsubishi Heavy Industries and Kawasaki Heavy Industries adding 13% and 12% respectively.
The yen’s trajectory has been more complex. The currency weakened over 1.81% to hit the psychologically important 150 mark against the dollar. Katayama, the new finance minister, previously stated in a March interview that Japan’s economic fundamentals suggest the yen’s real value is closer to 120-130 per dollar, signaling potential currency intervention if weakness becomes excessive.
Bond markets showed concern, with Japan’s 30-year bond yield rising over 10 basis points to 3.263%, while the 20-year debt added over six basis points to 2.674%. These movements reflect market expectations of increased government borrowing to fund fiscal stimulus.
Investor sentiment divides between optimism about stimulus and skepticism about implementation. According to Shrikant Kale, senior quantitative strategist at Jefferies, the immediate landscape features buoyant equities, a potentially weaker yen, and cautious bond markets, as investors adjust to the prospect of “Abenomics 2.0”. However, Hitoshi Asaoka, chief strategist at Asset Management One, cautioned that while the market welcomes Takaichi’s spending policy, achieving those goals remains uncertain as the LDP is still a minority party.
Gender and Leadership: Progress with Caveats
Though Takaichi’s election is a milestone in a country where women are severely underrepresented in government, critics say the hardline conservative won’t necessarily help women advance. Japan ranked 118th out of 148 countries in the World Economic Forum’s 2025 Global Gender Gap Report, with women making up less than 16% of lawmakers in the lower house of parliament and 10% of government ministers.
Takaichi opposes same-sex marriage, allowing married couples to use separate surnames, and supports male-only succession to the imperial throne. After Takaichi was elected leader of the LDP earlier this month, Japanese feminist author Chizuko Ueno said that the prospect of Japan getting its first female prime minister “doesn’t make me happy”.
The contradiction is stark: Japan has shattered its ultimate glass ceiling while the woman at the top actively opposes policies that would benefit women’s equality more broadly. This raises important questions about whether representation alone constitutes progress when divorced from substantive policy change.
Global and Regional Impact: Walking a Diplomatic Tightrope
Takaichi’s hardline stance on defense and foreign policy raises concerns about potential tensions with neighboring countries, including China and South Korea. She has long been a vocal critic of China and is a strong supporter of Japan’s military buildup, aligning herself closely with the United States.
Her past visits to Yasukuni Shrine, which honors Japan’s war dead including convicted war criminals, have drawn criticism from China and South Korea. While Takaichi sent an offering to the shrine in October 2025, she appears to be avoiding a personal visit to prevent angering Asian neighbors during her early tenure.
President Donald Trump is expected to visit Japan later this week, presenting Takaichi with an early diplomatic test. As a protege of Shinzo Abe, who was close with Trump during his first term, Takaichi has the potential to develop a similar relationship that could strengthen the US-Japan alliance.
China’s Ministry of Foreign Affairs offered a lukewarm response, saying it had “noted the election results” and hoped for constructive relations. The cautious reaction reflects Beijing’s concerns about Takaichi’s hawkish positions and her support for Taiwan.
Conclusion: Symbolism Meets Reality
Takaichi’s leadership represents a litmus test for Japan’s ability to modernize while maintaining political stability. She becomes Japan’s fourth prime minister in five years, reflecting ongoing political turbulence in the world’s fourth-largest economy. With a revolving door of prime ministers in recent years, Japan’s so-called “Iron Lady” will need to deliver results quickly to stay in power.
The tension between symbolic progress and substantive policy change defines this moment. Japan has achieved a historic first in gender representation at the highest level of government, yet the woman holding that position opposes many policies that would advance gender equality. Similarly, markets have rallied on expectations of economic stimulus, but implementation faces significant political constraints given the LDP’s weakened parliamentary position.
Takaichi faces mounting challenges: tackling rising prices, managing security and trade relationships with President Trump, and addressing domestic concerns about Japan’s cost-of-living crisis. Her success will depend not on breaking barriers—which she has already accomplished—but on whether she can navigate Japan’s complex political landscape to deliver tangible results for its 120 million citizens.
The world is watching to see whether Takaichi’s tenure marks a genuine turning point for Japan or simply represents continuity wrapped in historic packaging. The answer will shape not only Japan’s trajectory but also influence regional dynamics in an increasingly tense Indo-Pacific landscape.
