Prime Minister Takaichi’s First Policy Speech

Ambitions Lacking Details

By Takuya Nishimura, Senior Fellow, Asia Policy PointYou can find his blog, J Update here

November 1, 2025

Prime Minister Sanae Takaichi delivered her first policy speech to the extraordinary Diet session on October 24. She emphasized that her administration would make the Japanese economy and Japan itself stronger. However, it was not at all clear how she would do so or how Japan will fare under her leadership. One thing that was clear was her commitment to follow the policies of the former Shinzo Abe administration, which she greatly admires.

“I will strive to build a robust economy, turning people’s unease and apprehension over their current lives and the future into hope and foster a Japan that is stronger and more prosperous,” Takaichi said. She was adamant that she would restore Japanese diplomacy so that it “flourishes on the world’s center stage” – a term coined by Abe when he advocated for an active role for Japan in the world.

One question remains: What exactly is a strong economy? A “responsible and proactive public finances” is Takaichi’s main concept. She calls for bold governmental spending, which, she says, will raise incomes, transform people’s mindsets regarding consumption, and boost tax revenues without raising tax rates as business earnings increase. She aims to curb the growth of Japan’s outstanding debt so as not to exceed the rate of economic growth and lower Japan’s ratio of outstanding government debt to GDP.

This concept does not differ in any significant way from the “economic virtuous cycle” that former administrations had hoped to achieve. However, neither Abe nor other prime ministers were able to grow real wages. As these administrations poured money into the market by issuing government bonds, wages could not catch up with price hikes. While Takaichi and her allies have great nostalgia for Abenomics, that policy was a remedy for deflation, not for inflation from which the Japanese public is now suffering.

When she talks about responsibility for economic policies, Takaichi must show fiscal resources that will give effect to her policies. She promised in her policy speech that her administration would pass a bill in the current session of the Diet to remove the provisional gasoline tax rate. But she did not propose how she would find the fiscal resources to make up for lost revenue.

Takaichi listed several policies her administration would pursue, including subsidies for the wages of workers in medical services and nursing care facilities, for local communities to support small and mid-size entrepreneurs, and for payments to high schools for school lunches. But she never explained how she would pay for them. It is notable that, during her campaign for the presidency of the Liberal Democratic Party (LDP), Takaichi did not rule out issuing government bonds to fund her economic policies.

Takaichi also introduced the concept of “crisis management investment.” She defines it as strategic investments “to address various risks and social issues, including economic security, food security, energy security, health and medical security, and measures to enhance national resilience” with coordination between the private sector and the government. Another goal is to advance Japan as “the world’s best country to develop and use AI.” To implement this economic agenda, she proposed establishing a “Council for Japan’s Growth Strategy.”

LDP governments have long used disaster management to justify expenditures for infrastructure construction. Mirroring the views of her immediate predecessor, Shigeru Ishiba, Takaichi stressed the need to prepare for the Nankai Trough Great Earthquake and to continue reconstruction following the great earthquakes in northeast Japan in 2011 and Noto Peninsula in 2024.

Takaichi’s respect for Abe comes through in her diplomatic policies. A “Free and Open Asia-Pacific (FOAP)” is at the center of her foreign policy. Abe proposed FOAP in 2016 to counter Chinese advances in the region. Takaichi appointed Ministry for Foreign Affairs (MOFA) official, Keiichi Ichikawa, to be the new Secretary General of the National Security Secretariat. Ichikawa originated the idea of FOAP in MOFA. 

Takaichi also declared that she would take “front-loaded measures” to increase the defense budget to two percent of GDP within FY2025. Former Prime Minister Fumio Kishida assumed that income tax, corporate tax, and tobacco tax revenues would fund the two percent commitment. Takaichi has yet to adopt that view, and she has not indicated how she would pay for the increase in the defense budget.

As a practical matter, the most important agenda item for the Takaichi administration is how to ensure the survival of her current minority government. Yet, she did not meaningfully address the priority policy of her coalition partner, the Japan Innovation Party (JIP) – a reduction in the number of Diet seats. This reduction was the “absolute condition” for the JIP to enter a coalition with the LDP. In her speech, Takaichi did not mention any reduction at all, instead referring to the policy as social security reform. But it is nothing more to her than a topic to “discuss quickly.” 

Takaichi also omitted any mention of campaign financing reform, namely the prohibition of donations from companies and organizations. The LDP’s resistance to reform was the greatest reason Komeito left the coalition with the LDP. Indeed, far from pursuing reform, Takaichi appointed lawmakers who had been involved in the kickback fund scandal, to positions in her government and on the LDP board. Her indifference to political reform may engender some criticism.