CaliToday (20/10/2025): Japan is on the verge of making history as Sanae Takaichi is set to become the nation's first female prime minister. Her path to the premiership was secured on Monday after her ruling Liberal Democratic Party (LDP) struck a dramatic, 11th-hour coalition deal with the Japan Innovation Party (JIP).
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| Sanae Takaichi is on track to become Japan's first woman premier (Yuichi YAMAZAKI) |
The announcement of a new government, just one day before a critical parliamentary vote, sent a jolt of optimism through financial markets, propelling the Nikkei 225 index to a new all-time high.
The JIP confirmed the agreement on Monday, ending a week of intense political uncertainty.
"After giving it careful thought last night, I telephoned (LDP) president Takaichi this morning to reach a coalition agreement," said Hirofumi Yoshimura, co-head of the JIP, in a televised statement. "At 6:00 pm, we will formally sign the agreement."
The deal paves the way for the 64-year-old Takaichi to be appointed as the country's fifth prime minister in as many years, but she will take power at the head of a fragile government facing a mountain of challenges.
A Political Scramble After a 26-Year Alliance Collapses
Takaichi, a traditionalist from the LDP's right-wing and a noted China hawk, won her party's leadership election earlier this month. However, her bid to become prime minister was almost immediately derailed by the stunning collapse of the LDP's 26-year coalition with the Komeito party.
Komeito, a centrist, Buddhist-backed party, walked away from the alliance citing two primary concerns:
The Slush Fund Scandal: Komeito demanded the LDP tighten party funding rules following a damaging scandal over undisclosed political funds, which the LDP was seen as slow to address.
Takaichi's Hawkish Stance: The party was deeply "unnerved" by Takaichi's historically harsh rhetoric on China and her regular, controversial visits to Tokyo's Yasukuni Shrine, which honors Japan's war dead, including convicted war criminals.
The split left Takaichi politically stranded and scrambling to find new partners against a ticking clock.
A Fragile Victory: The Perils of a Minority Government
The new LDP-JIP coalition is a partnership of convenience, not a decisive majority. The alliance is still two seats shy of the lower house majority needed to guarantee Takaichi's appointment in a first-round vote.
However, Takaichi is still overwhelmingly likely to win the premiership. Under Japan's parliamentary rules, if no candidate wins an outright majority in the first round, a second-round run-off vote is held. In that round, she only needs to secure more support than the opposition candidate, a threshold she is expected to easily clear.
While this secures her the top job, it means her new coalition will be a minority government in both houses of parliament. This will force Takaichi to seek support from other parties to pass every piece of legislation, from the budget to national defense policies, ensuring a tenure marked by constant political horse-trading.
Markets Soar on "Abenomics 2.0" Hopes
While politicians maneuvered, investors celebrated. The announcement of a new, pro-spending government sent the Nikkei 225 index soaring more than three percent to a new record above 49,000 points.
Analysts said the rally was driven by hopes for a return to "Abenomics," the economic policies of Takaichi's mentor, former premier Shinzo Abe.
"Investors were cheered by hopes of 'proactive fiscal policies' by Takaichi," said Yutaka Miura, an analyst at Mizuho Securities, as reported by Bloomberg. Takaichi has long advocated for aggressive monetary easing from the Bank of Japan and a significant expansion of government spending.
During her leadership campaign, she toned down her rhetoric on both the economy and China. However, the JIP's demands will test her new government immediately. The smaller party is reportedly seeking to lower the consumption tax on food to zero and to abolish corporate and organizational political donations. In return, reports indicate the JIP will not hold any ministerial posts in Takaichi's cabinet.
Trump, a Stagnant Economy, and Rising Populism
Takaichi will have no honeymoon period. Her first major test comes at the end of the month, with US President Donald Trump due to visit Tokyo on his way to the APEC summit in South Korea.
Unresolved trade deals, US pressure on Japan to halt Russian energy imports, and demands for increased defense spending will all be on the table.
Beyond the immediate diplomatic scramble, Takaichi must confront the deep, structural crises facing Japan:
A "slow-burning crisis" of a falling population.
A flatlining economy struggling to find growth.
A steady slide in public support for the LDP, which has governed Japan almost non-stop since 1955.
This decline has fueled the rise of populist, right-wing parties like Sanseito, which has gained support by calling immigration a "silent invasion"—a potent slogan in a nation where foreign-born residents make up only around three percent of the population.