Japan’s prime minister, Sanae Takaichi, rolled the dice on a snap election – and it paid off.
She and her Liberal Democratic Party (LDP) have the kind of decisive majority – 316 out of 465 seats – that few leaders have enjoyed recently. Rather, Japan has had a revolving door of prime ministers.
Now the question is what Takaichi does with it. Can she deliver what has eluded the Japanese economy for decades: faster growth?
Japan has a long list of problems: sluggish growth, public debt that is the largest in the world, and a working population that is both ageing and shrinking.
Takaichi, some observers believe, has the chance to change this, reshaping how Japan runs what is the world’s fourth-largest economy – and how the markets see it.
She will steer Japan in the right direction, says Tomohiko Taniguchi, a policy adviser and former speechwriter for late prime minister Shinzo Abe.
“If successful, it will serve as a premier case study for ageing societies worldwide.”
Where will the money come from?
Takaichi had campaigned on the promise that she will spend more, including investment in key industries, to boost growth.
This was a pivot from her predecessors. She vowed to cut taxes so people can spend more, and said growth rather than savings was the priority.
But markets were rattled with doubt over how she would fund these plans. Her overwhelming majority seems to have assured investors – and it showed in the positive market reaction to her Sunday night win.
Investors have been placing what they call the “Takaichi trade”, buying Japanese shares while selling the yen and government debt. Crucially, the yen has also gone up in value – for some investors, a stronger currency is a good thing.
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