Prime Minister Sanae Takaichi's Economic Challenge: Can Japan Bounce Back?

Tue Feb 10 2026 10:26:52 GMT+0200 (Eastern European Standard Time)

After a decisive election victory, Japan's Prime Minister Sanae Takaichi faces the daunting task of reviving a stagnant economy while managing public debt, an ageing population, and international pressures.

Sanae Takaichi's landslide victory in Japan has granted her the mandate to tackle the country's enduring economic challenges. While her administration plans to increase spending and cut taxes, concerns regarding funding mechanisms and an ageing workforce persist. This article explores Takaichi's policies and the complexities surrounding Japan's economic revival amid international trade tensions and domestic issues.

Prime Minister Sanae Takaichi's Economic Challenge: Can Japan Bounce Back?

On the heels of a snap election, Japan's Prime Minister Sanae Takaichi has secured a significant victory, positioning her Liberal Democratic Party (LDP) with 316 out of 465 seats in the parliament. While this monumental win enables a strong legislative agenda, it raises the critical question: Can Takaichi effectively revitalize Japan's struggling economy?

Japan grapples with a myriad of economic hurdles including sluggish growth, immense public debt—the largest globally—and a shrinking, aging workforce. These issues have plagued the nation for decades, leading many to wonder if Takaichi has the solutions to these chronic challenges.

Even amid her resounding electoral win, the pathway to economic recovery remains fraught with complexities. Critics caution that Takaichi's proposed policies—promising increased spending on key industries and tax cuts to stimulate consumer spending—could exacerbate inflation. As prices rise, particularly as seen with essential goods, voters have expressed increasing concern over their financial wellbeing.

Despite this, investors responded positively to her election, initiating what some have dubbed 'the Takaichi trade,' with an influx of purchases in Japanese stocks alongside a stronger yen. However, this optimism comes weighed down by concerns over how her ambitious plans will be financed, especially given Japan's historical reliance on low-interest rates and high government expenditure.

Further complicating her plans is Japan's demographic reality. The country faces labor shortages particularly in sectors like construction, agriculture, and hospitality, prompting calls for a more open immigration policy—a significant political issue within her conservative base. Instead, Takaichi and her advisors advocate for leveraging technology and greater workforce participation by women and older individuals.

Japan's precarious economic position is not just a domestic concern; it is also influenced by international dynamics, especially with neighboring powers like China. As China continues to rise as a formidable economic player, Japan must navigate its trade relationship with caution, balancing its security alliances while pursuing economic growth. Takaichi's commitment to reduce dependency on Chinese imports underscores the strategic pivot necessary for Japan to safeguard its economic future.

Ultimately, the challenges Takaichi faces may determine not only Japan's direction but could potentially serve as a model for other aging societies worldwide. As she embarks on her mission to restore Japan's economic vitality, one thing remains clear: the journey ahead is laden with critical decisions that must be approached with both caution and innovation.