Sanae Takaichi
Takaichi launched a record ¥130T budget process folding supplementary spending into the initial package, pushing debt-servicing requests to ¥36.6T and JGB yields to 30-year highs. She is pressuring BOJ Governor Ueda for bond purchases, ordering utility subsidies against rising inflation, and pursuing a food sales-tax cut — all while managing diplomatic standoffs with Putin and Trump's ICC sanctions.
Sanae Takaichi is pressing the most expansionary fiscal agenda Japan has seen in decades, and the bond market is pushing back on every front.
On August 28 she opened the FY2026 budget process targeting a record ¥130 trillion in allocation requests, folding supplementary spending into the initial budget for the first time and creating a multi-year growth-strategy account that exempts capital investment from standard spending caps. The Finance Ministry's debt-servicing request jumped 17% to ¥36.6 trillion, directly attributed to her fiscal program. The 10-year JGB yield hit 2.945%, a 30-year high, with markets pricing an 80% chance of a BOJ rate hike at the September 17-18 meeting.
Takaichi responded by directly pressuring BOJ Governor Kazuo Ueda to purchase government bonds and curb long-term rates. She has already placed two reflationary appointees on the board, but the BOJ scheduled its July 2027 meeting to lock in hawkish votes before those terms shift the balance. She also ordered the cabinet to maintain gasoline, electricity, and gas subsidies even as Tokyo core CPI hit 1.8%, putting her cost-of-living stance in direct tension with the inflation trend driving the central bank. Weak Q2 GDP of 1.1% against a 2% forecast gave her stimulus push urgency.
On diplomacy, she condemned Putin's August 13 visit to the Kuril Islands as "absolutely unacceptable," triggering reciprocal ambassador summons. She declined to rule out revising Japan's three non-nuclear principles after the U.S. defense strategy omitted explicit extended-deterrence language. She spoke with Erdoğan on August 19, pressing free navigation through the Strait of Hormuz. She broke with Trump's administration by pledging to protect the ICC after U.S. sanctions, dispatching an official to The Hague. With Trump she is co-leading a deep undersea rare-earth mine near Minamitorishima to break China's supply-chain grip, targeting commercialization by 2028.
She is also advancing a corporate-governance reform modeled on 2000s German tax changes, allowing indefinite deferral of the roughly 30% tax on gains from non-core business sales if proceeds are reinvested. Her cabinet passed legislation to select Japan's first secondary capital from 13 candidate cities, a plan an opposition lawmaker called half-baked. She defended her residence-based, near-solitary work style — zero to three hours of sleep, minimal cabinet meetings — as her approval ratings slide over a perceived detachment from household pressures. She is not planning a Yasukuni visit on the August 15 anniversary, a calibrated restraint on a historical flashpoint.
On their plate
Takaichi launched the FY2026 budget process targeting a record ¥130 trillion in allocation requests, folding supplementary spending into the initial budget and creating a multi-year growth-strategy account. The Finance Ministry's debt-servicing request rose 17% to ¥36.6 trillion, the largest ever, directly attributed to her fiscal agenda. Finance Minister Satsuki Katayama calls the process reform the most significant since WWII.
Takaichi is directly pressuring BOJ Governor Kazuo Ueda to purchase government bonds and curb long-term yields as the 10-year JGB hit 2.945%, a 30-year high. She appointed two reflationary board members, but the BOJ scheduled its July 2027 meeting to lock in hawkish votes before her appointees reshape the balance. Economists flag her stimulus as a driver of yen weakness that could force more aggressive tightening, with an 80% rate-hike probability priced for September.
Takaichi ordered the cabinet to maintain gasoline, electricity, and natural gas subsidies even as Tokyo core CPI hit 1.8%. She defended her record on X citing 1.7% real wage growth and slowing inflation, while omitting the cabinet-backed food sales-tax cut from 8% to 1% that requires parliamentary approval. She faces a petition from Murakami seniors demanding inflation-matched pensions as kerosene costs strain elderly fixed incomes.
Takaichi condemned Putin's Kuril Islands visit as "absolutely unacceptable," triggering ambassador summons from Moscow. She declined to rule out revising Japan's non-nuclear principles after the U.S. defense strategy dropped explicit extended-deterrence language. She pledged to protect the ICC against U.S. sanctions, dispatching an official to The Hague. She called Erdoğan on August 19 pressing free Hormuz navigation, and is co-leading with Trump a deep undersea rare-earth mine near Minamitorishima to break China's supply-chain leverage.
Takaichi is advancing a corporate-governance reform allowing indefinite deferral of the roughly 30% tax on gains from non-core business sales if proceeds are reinvested, modeled on 2000s German tax reforms. Tax-reform requests are due by end of August. Domestically, she defended her residence-based solitary work style — zero to three hours of sleep, minimal cabinet meetings — as approval ratings decline. Her cabinet passed legislation to select a secondary capital city from 13 candidates, facing opposition criticism.
Key relationships
Finance Minister Katayama is implementing Takaichi's budget-process overhaul, which Katayama calls the most significant post-WWII reform, shifting supplementary spending into the initial budget to fund a food sales-tax cut and a ¥370T growth-strategy framework.
Takaichi is directly pressuring the BOJ Governor to purchase government bonds and curb long-term yields, a confrontation with central bank independence as her fiscal expansion pushes yields to 30-year highs.
Takaichi is co-leading with Trump the world's deepest undersea rare-earth mining project near Minamitorishima to break China's rare-earth leverage, targeting commercialization by 2028.
Takaichi condemned Putin's August 13 visit to Iturup in the disputed Kuril Islands as absolutely unacceptable, prompting Russia to summon Japan's ambassador and warn of countermeasures over Japan's Ukraine support.
CDP lawmaker Kishi opposes Takaichi's secondary-capital-city plan, calling it half-baked partisan maneuvering favoring the Japan Innovation Party.
Takaichi dispatched an official to The Hague to coordinate support for ICC President Akane after the U.S. imposed sanctions on the court, hardening Japan's stance from "very unfortunate" to active protection as the court's largest financial contributor.
Takaichi called Erdoğan on August 19, praising Türkiye's mediation between the U.S. and Iran and pressing the need for free navigation through the Strait of Hormuz without additional costs.
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