What to expect for Japan’s economy under Sanae Takaichi, its 1st female prime minister

TOKYO (AP) — Stock prices rose recently in Tokyo on hopes that a conservative Japanese lawmaker sanae takaishi, Who was he? Selected Tuesday She will be Japan’s first female prime minister and will double down on her pro-market policies, including massive defense spending and cheap credit.

The 225-share Nikkei benchmark index rose near the symbolically important level of 50,000 points, rising 0.7% to 49,517.57 points. Takaishi, an enthusiast of motorcycles and heavy metal music, won the parliamentary ballot in the House of Representatives, which gave her 237 votes, more than the 233 votes needed to win.

Here’s what to expect from what has been called the “industrial economy”:

Inflation and wages are the main concerns

Consumer price increases exceeded the Bank of Japan’s 2% target range of 2.5% to 3%. This is the central bank Gradually raise rates From its long level near or below zero. Wages are still close to the level they were 30 years ago, and will only exceed the 1997 average level in 2024 for the first time. Meanwhile, low interest rates have helped keep the Japanese yen weak against the dollar, amplifying inflation since most of what Japan consumes is imported.

“I want to focus first on dealing with rising consumer prices,” Takaishi told reporters after being elected head of the ruling Liberal Democratic Party earlier this month, putting her in line to replace outgoing Prime Minister Shigeru Ishiba.

Takaishi indicated that she opposes raising interest rates. The promise of continued cheap credit is one reason why stock prices have risen. But keeping interest rates low will hamper efforts to reduce inflation and strengthen the Japanese yen.

In a repeat of many of her predecessors’ promises, Takaishi also pledged to deliver pay increases, without explaining how she intends to do so.

Dealing with demographics

Japan’s population has been shrinking and aging rapidly for many years, creating labor shortages and undermining the country’s potential economic growth.

Although she is unabashedly conservative on most social issues, Takaishi has said she favors tax incentives for companies that provide child care facilities for their employees and potential tax breaks for family spending on child care.

It is unclear what the government under any leader would do to counter the declining birth rate, which partly reflects financial difficulties in raising and educating children when wages fail to keep pace with inflation. It also reflects a company culture that is not conducive to achieving balance between work and family life.

Following in Abby’s footsteps

Takaishi is expected to emulate the policies of her former late mentor Prime Minister Shinzo Abe. He resigned in 2020 and was Assassinated In 2022. His “Abenomics” approach included promises to provide cash aid and boost government spending, despite a national debt roughly three times the size of the economy.

Like Abby, she is tough on defense. Her political rise has led to the purchase of large amounts of stock in military-related companies such as Mitsubishi Heavy Industries, Yaskawa Electric, and Japan Steelworks.

Takaichi will certainly seek to establish friendly relations with US President Donald Trump, just as Abe did, and strengthen Japan’s security alliance with Washington. They are expected to meet later this month.

Takaishi initially said Japan might want to reconsider its $550 billion pledge to Japan Trump administrationas part of a deal that helped reduce US tariffs on imports from Japan. She later said she would respect the agreement, despite popular opposition to handing over Japanese taxpayer money to Washington.

The future remains fraught with risks

Takaishi will confront problems that have bedeviled Japanese leadership for decades. Any major reforms will face resistance from entrenched vested interests. Japanese prime ministers’ terms tend to be short and prone to conflict between party factions and hereditary political fiefdoms that control most seats in parliament.

In order to win Tuesday’s parliamentary elections, the Liberal Democrats formed an alliance with the Japan Innovation Party, a libertarian opposition group based in Osaka.

But Takaishi will likely need support from lawmakers who belong to other parties in the divided and fractious opposition to pass the legislation. They extend from the Japanese Communist Party on the far left to Sanseto and others on the far right.

Takaya Suzuki, who runs a restaurant and real estate company, supports a smaller, nationalist-leaning opposition party called the Japan Conservative Party, whose policies are similar to Takaishi’s. He admires Trump and says he supports Takaishi.

But he added: “Even if she does her best, it will be difficult.”

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Yuri Kageyama is in the topics: https://www.threads.com/@yurikageyama