Takaichi’s Long-Term Vision May Fail to Dispel Inflation Angst

Sanae Takaichi Photographer: Kiyoshi Ota/Bloomberg Photo by Kiyoshi Ota /Bloomberg

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(Bloomberg) — Japanese Prime Minister Sanae Takaichi’s long-term vision for powering the nation’s growth through domestic investment risks becoming a hollow ambition if she fails to address shorter-term angst over the cost of living.

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Takaichi has rolled out an unprecedented plan to generate ¥370 trillion ($2.3 trillion) of domestic investment over the next 14 years during the first parliamentary session since her landslide election victory. That blueprint, which aims to deliver 3% nominal annual growth, underscores her intentions to use her supermajority in the lower house of parliament to build a transformative legacy for the nation. 

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But there’s less clarity on how much the government will need to contribute to support this vision and where that money will come from. The same goes for a likely sales tax cut and increased defense spending. Those questions are feeding into market concerns about the finances of the nation.

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The premier can point to a list of successes over the months since her landslide electoral triumph. She has successfully navigated a summit with US President Donald Trump and largely limited further fallout with China, following her remarks on Taiwan last year. 

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Takaichi has helped secure alternative oil supplies for Japan to limit the impact of the Middle East conflict and visited countries across Asia and Europe to encourage stronger defense ties and equipment purchases. She’s also launched an intelligence agency while ramping up scrutiny of foreign investment in Japanese companies among 64 bills passed into law during the parliamentary session.

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But her soaring public support is starting to cool rapidly as she is seen by voters as focusing too much attention on pet interests and distant future targets, rather than the here and now. That impression has been strengthened by the hasty passage of legislation to shore up the male-dominated imperial line, ban desecration of the national flag and establish a back-up capital city. 

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“Her main areas of interest are areas like defense, investment and economic security,” said Izuru Makihara, a professor of politics at Tokyo University. “Issues like people’s livelihoods and alleviating the burden on households do not seem to be her core interest.”

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She’ll need to change tack if she hopes to stick around as prime minister beyond her term as the ruling party’s leader through September next year and push through her lofty ambitions.

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The latest parliamentary session ended Saturday, about a week later than originally scheduled. It was convened in February shortly after Takaichi and her ruling Liberal Democratic Party won a supermajority in the lower house, securing the country’s biggest mandate since World War II.

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Instead of sweeping draft legislation through parliament with ease, Takaichi has encountered hurdles in the upper house, where the ruling coalition still lacks a majority. The vote on creating the backup capital in case Tokyo suffers a natural disaster only squeaked through the upper house by two votes.

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In a press conference on Monday, Takaichi defended her record and said she was very much focused on people’s livelihoods, in contrast to her predecessor a year earlier. She said at that time young people had “lost their dreams” for the future.