[Takaichi's First Year] Second Year in Office Put to the Test... Must Tackle Inflation and Economic Burden

Lack of outspoken aides: "No one can speak frankly"
Power concentrated in the prime minister's hands, weakening internal checks

Expansionary fiscal policy at odds with the BOJ
Concerns over inflation and fiscal soundness

Next year, the second year of Japanese Prime Minister Sanae Takaichi's administration, is expected to be a watershed in determining whether she can lay the groundwork for a long-term hold on power. She faces a range of challenges, including passive support for her policies, weakened checks within the administration, and the economic burden of expansionary fiscal policy. In particular, some are beginning to question how long "Sanaenomics," which promotes expansionary fiscal policy amid persistent inflation, can remain effective. How the Takaichi administration manages these variables is expected to determine its performance in its second year.

The key issue, first and foremost, is whether the Cabinet can maintain its high approval rating. In a poll conducted by TV Asahi on October 17-18, the most common reason respondents gave for supporting the Takaichi Cabinet was that they thought it would be better than other Cabinets, at 36.4%. By contrast, only 22.3% said they supported it because they had high hopes for its policies. The Asahi Shimbun also analyzed its poll results on October 19, concluding that "passive support for the Takaichi Cabinet is growing." Critics say that despite its high approval rating, its support base could easily falter if dissatisfaction with its policies grows.

Signs of change are also emerging in the "Sanakatsu" craze that spread early in the administration. Sanakatsu combines the Prime Minister's name, "Sanae," with "Oshikatsu," a term for supporting one's favorite celebrity or idol. It refers to fans adopting Takaichi's fashion and food preferences, among other things. The Mainichi Shimbun reported on October 4, marking the first anniversary of Takaichi's election as president of the Liberal Democratic Party, that the Sanakatsu craze was fading. The newspaper also described cases in which supporters who felt the economic impact of worsening Japan-China relations following Takaichi's remarks about a possible Taiwan contingency had stopped their fan activities.

Japanese Prime Minister Sanae Takaichi delivers a eulogy at a memorial ceremony in Tokyo on July 11 marking the fourth anniversary of the death of former Prime Minister Shinzo Abe. Takaichi has been dubbed “post-Abe,” having recorded high approval ratings comparable to Abe’s and carried on many of his key policies. Recently, she has gone further, establishing her own independent political path. Tokyo, Japan = AFP-Yonhap News.

Disappointment is also evident among supporters who had placed their hopes in the symbolism of Japan's "first female prime minister." Takaichi has opposed introducing an optional system allowing married couples to use separate surnames, as well as allowing a woman to ascend to the throne. This has prompted criticism in Japan, including the question, "How can she be the first female prime minister yet not allow a woman to become emperor?" The Mainichi also noted that "there is a wide gap between the expectations raised by the emergence of a female prime minister and actual gender-equality policies."

Another important issue is whether internal checks can be restored under the current system, which concentrates power in the prime minister's hands. On October 15, Agriculture Minister Kazuo Yana sparked controversy by saying he had cut road funding for local governments that had not supported him. Takaichi initially insisted that he remain in his post, but she ultimately accepted his resignation after allegations of violations of the Public Offices Election Act also emerged.

The Asahi Shimbun analyzed the incident as a consequence of the "Takaichi-dominant system." A senior Liberal Democratic Party official lamented, "There is no one who can speak their mind to the prime minister." The Nikkei also said Takaichi had worsened the situation by hesitating to dismiss a Cabinet minister she had personally selected. An aide to the prime minister told the Nikkei, "It was a mistake in the initial response. In trying to limit the damage, she ended up making it worse." Critics say that if unilateral decision-making is repeated in future personnel appointments and policy decisions, it could burden the administration.

Above all, the sustainability of Sanaenomics, the administration's economic policy, is also seen as a key variable. Takaichi has pledged "responsible proactive fiscal policy," pursuing growth investments and tax cuts, but concerns about inflation and fiscal soundness are growing.

On October 19, Bank of Japan (BOJ) Governor Kazuo Ueda said underlying inflation was quite close to the 2% target. With the BOJ prioritizing price stability, there are concerns that the government's fiscal expansion could add to inflationary pressure. Reuters also pointed to the possibility that large-scale growth investments and tax cuts could weaken the yen and push up government bond yields.

Securing funding for the planned cut to the consumption tax on food, which the government aims to implement in April 2027, is another challenge. On October 19, Takaichi signaled that the government might issue government bonds to fund the measure. Markets, however, say the government must both ease the burden on households through the tax cut and maintain market confidence in its fiscal management. Takahide Kiuchi, chief economist at Nomura Research Institute, said, "The biggest challenge for the Takaichi administration is that it has not gained sufficient confidence from financial markets." Ultimately, in its second year, the extent to which Sanaenomics can achieve its two goals of growth and price stability is expected to be a key factor shaping the administration's future.

This content was produced with the assistance of AI translation services.