Japan’s Next Leader May Not Stick Around Long Enough to Matter

Japanese veteran lawmaker Sanae Takaichi won the Liberal Democratic Party’s election on Oct. 4. (RICHARD A. BROOKS/AFP via Getty Images)

Sanae Takaichi is almost certain to be Japan’s first female prime minister after this weekend’s election. She will face a bewildering array of challenges right out of the gate: inflation rising faster than wages, restive Gen Z voters, China’s growing dominance, and President Donald Trump.

But the real test for this hardline conservative is the clock. Over the last two decades, the vast majority of Japanese leaders have managed just 12 months in power. That’s how long the outgoing Shigeru Ishiba got. Ishiba is Japan’s 10th prime minister since 2006.

Japan’s Liberal Democratic Party picked Takaichi on Saturday to be its choice to become No. 11. But chances are we will be talking about No. 12 soon enough. Eight came and went within 365 days. Even before Takaichi has a chance to form a government on Oct. 15, the clock is ticking.

This could be bad news for global markets. The time element incentivizes Takaichi to double down on the policies that she thinks—in some ways wrongly—worked in the past. One is giving “Abenomics” another go at a moment when an aging and uncompetitive Japan can least afford it.

The reference here is to the stimulus-heavy strategy championed by Takaichi’s mentor, the late Shinzo Abe. In 2012, Abe led the LDP back into the majority by pledging to cut bureaucracy, modernize labor markets, catalyze a startup boom, empower women, and restore Tokyo’s place as the center of Asian finance. Mostly, though, he cajoled the Bank of Japan to turbocharge quantitative easing policies.

Japan got a sharply weaker and periods of modest growth. But the price tag was the biggest debt burden among developed nations—roughly 260% of gross domestic product.

More of that, please. That is essentially what Takaichi plans for Asia’s No. 2 economy. The yen’s slide back to 150 versus the dollar is just the beginning. You can bet that the bond market is bracing for the worst. The LDP currently controls neither house of parliament, forcing Takaichi to woo opposition parties to give her a governing majority. Those parties will push her for tax cuts.

In recent months, concerns about fiscal loosening sent 20-year bond yields to the highest levels since 1999. That was the year, incidentally, when the BOJ first cut rates to zero. In 2001, it pioneered quantitative easing. The BOJ has yet to find a way out.

BOJ Governor Kazuo Ueda is surely trying. Back in January, he hiked rates to 0.5%, the highest in 18 years. The tightening cycle is now on hold, in response to Trump’s tariffs. Now, Ueda must contend with an incoming prime minister who wants a weaker yen, a return to the fiscal largesse of the Abe era, and a less hawkish BOJ.

An added wildcard is how Takaichi might get on with Trump, who has been blaming Japan for everything that is wrong with the U.S. economy for decades. Though China now has Trump’s attention, Japan was the first target of his Asia-is-stealing-from-us worldview.

Last month, Takaichi hinted that she might seek to redo the U.S.-Japan tariff deal that was formed in July. In particular, she wants to revisit Trump’s demand that Tokyo pay a $550 billion “signing bonus” in cash.

“We must stand our ground if anything unfair that is not in Japan’s interests comes to light in the process of implementing the deal,” Takaichi told Fuji TV. “That includes a potential renegotiation.”

It isn’t clear what would make Trump’s head explode faster: a sharply weaker yen or Tokyo refusing to fork over the equivalent of Ireland’s GDP. What if Takaichi makes both happen?

Takaichi is a nationalist who cites Margaret Thatcher as her role model. She revels in being known as Japan’s “Iron Lady.” But if she does push back against Trump, Takaichi would be breaking with Abe. For all his strongman histrionics, Abe was a pushover during the Trump 1.0 era. He even nominated Trump for a Nobel Peace Prize.

Takaichi may indeed go the Abe route, which would make her, arguably, Trump’s only real pal in democratic circles. Her China-hawk reputation and anti-immigration rhetoric might give Takaichi much to discuss with Trump. Also, the rise of the MAGA-like Sanseito Party in Japan is a formidable challenge to the staid, establishment LDP. Allying with Trump could make winning over disillusioned 20-somethings a little easier.

Yet another dose of Abenomics isn’t the way to create good-paying jobs to cheer Gen Z. That requires leveling playing fields so that startup companies can thrive, expand, and create more ground-up economic energy in a historically top-down Japan. Rather than revive Japan’s animal spirits, 26 years of free money reduced the urgency for disruption, reinvention, and risk-taking.

Instead of Japan’s Thatcher, Takaichi could be remembered as its Liz Truss, who infamously caused a debt panic in her 44 days as U.K. leader in 2022. Takaichi’s talk of fiscal expansion already has the bond vigilantes worried.

Finally, Takaichi’s stance on one of Japan’s biggest economic failures—chronic gender inequality—is enigmatic, to say the least. Though she is poised to shatter Japan’s gender “glass ceiling,” Takaichi is no one’s idea of a progressive feminist. She is strongly against married couples having different last names. She opposes same-sex marriage.

Of all Japan’s economic goals, its ranking of 118th out of 148 countries in the World Economic Forum’s gender equality index may be the most frustrating. Tokyo ranked 101st when the LDP took power in 2012 on the promise of a “womenomics” revolution. The irony is that even Japan’s first female leader might not be able to halt this backsliding.

To achieve that, Takaichi would need a new economic strategy—not a replay of past failures. She must also stick around longer than 12 months to accomplish anything notable as Japan heads toward a decidedly uncertain 2026. If the last two decades are any guide, Takaichi’s odds of making it to month 13 aren’t great.

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