A Takaichi cabinet will be formed, with the first female prime minister in history—Finance Minister Katayama and Economy Minister Kiuchi.
The Ishin Party will cooperate outside the cabinet, with Foreign Minister Motegi, Defense Minister Koizumi, and Minister of Internal Affairs and Communications Hayashi forming a party-wide alliance.
Former Finance Ministry bureaucrat Katayama and active fiscal policy advocate Jonouchi will manage the economy: price control measures are urgently needed.
In their plenary sessions on the 21st, both the House of Representatives and the House of Councilors nominated LDP President Sanae Takaichi as the 104th Prime Minister. Following an inauguration ceremony at the Imperial Palace, Takaichi will become the first woman to assume the office. He will hold a press conference at 10:00 p.m. to announce his administration’s policies.
Takaichi’s Cabinet will form a new coalition government with the Japan Restoration Party, but the latter will participate as a “non-cabinet affiliate,” without contributing ministers. Takaichi’s administration, which was in jeopardy due to the departure of the Komeito Party, has achieved a degree of stability. With a host of issues to address, including the urgent formulation of measures to combat rising prices and the expected visit of US President Trump to Japan next week, Takaichi’s ability will be immediately tested.
In the economic cabinet, Satsuki Katayama, former Minister of State for Regional Revitalization, will be the first woman to be appointed Finance Minister, while Minoru Kiuchi, Minister of State for Economic Security and an advocate of proactive fiscal policy within the LDP, will be appointed Minister of Growth Strategy and Minister of State for Economic and Fiscal Policy. Katayama is a former finance official. In 2023, during the Fumio Kishida administration, Kiuchi, an advisor to a group of Diet members, drafted a proposal calling for a freeze on the calendar-based primary balance (BP).
She appointed former Defense Minister Kihara Minoru as Chief Cabinet Secretary, a key Cabinet position. She also appointed former Secretary-General Motegi Toshimitsu, who ran in the presidential election for the LDP, as Minister of Foreign Affairs, Agriculture Minister Koizumi Shinjiro as Minister of Defense, and Chief Cabinet Secretary Hayashi Yoshimasa as Minister of Internal Affairs and Communications, working to build a unified party structure. In addition, she appointed Minister of State for Economic Revitalization Akazawa Akimasa as Minister of Economy, Trade, and Industry. For the Ishin Party, he appointed Diet Affairs Committee Chairman Endo Kei as Special Advisor to the Prime Minister, in charge of coalition agreement policy.
In the House of Representatives nomination elections, Takaichi obtained a majority of 237 votes and was elected in the first round. The LDP and the Japan Innovation Party (JIP) won 231 seats, gaining six more votes. In the House of Councilors, they fell short of a majority in the first round, and Takaichi defeated Constitutional Democratic Party leader Yoshihiko Noda in a runoff.
At a joint meeting of both houses of parliament on the morning of the 21st, Takaichi declared: “We will move forward with unprecedented flexibility if it is in the best interests of the nation and its people.” Ishin Party co-leader Fumitake Fujita stated at a press conference: “Transforming Takaichi’s administration into a stable, long-term administration will help us overcome this national crisis, strengthen and enrich the Japanese archipelago, and advance on our path as an independent nation.”
On the 21st, Tokyo stocks rose, with the Nikkei reaching a new all-time high for the second consecutive day. Expectations about the policies of Takaichi’s Cabinet, which will take office that evening, generated buying orders. The index briefly approached 50,000 yen for the first time, but selling intensified in the afternoon, and even fell after Takaichi’s election as prime minister.
Bond prices are rising (interest rates are falling) due to optimism about political stability. Concerns about fiscal expansion have eased somewhat following the news of the appointment of Katayama, a former Finance Ministry official, as finance minister. The yen has depreciated to around 151 yen against the dollar.
In a report on the 21st, Eiji Kinouchi, chief technical analyst and head of thematic research at Daiwa Securities, stated that Takaichi is aiming for demand-driven inflation, noting that “an expansionary fiscal policy and accommodative monetary policy are likely to lead to an increase in stock prices.” He added that the demand shortfall is expected to be covered by fiscal investment and Osaka’s thin capitalization plan.
Supplementary Budget
The new administration is expected to present a supplementary budget for this fiscal year at the extraordinary Diet session, which includes measures to combat rising prices. This will test Takaichi’s economic and fiscal management, as he advocates a responsible and proactive fiscal policy.
The coalition government agreement between the LDP and Ishin pledged to quickly implement measures to combat rising prices, including subsidies for electricity and gas bills. It also pledged to pass a bill to abolish the temporary gasoline tax during the extraordinary Diet session, but made it clear that it would not implement the one-time payment that the LDP had proposed in the House of Councilors elections.
On the 21st, LDP Secretary-General Shunichi Suzuki appeared on an NHK program and said, “First and foremost, we would like to address the economy, particularly the current rise in prices.”
Attention is also being paid to the Bank’s relationship with the Bank of Japan, which will hold its monetary policy meeting on the 30th. In a TV Tokyo program on which Takaichi appeared after taking office as governor, she noted that the Bank of Japan decides monetary policy methods, but also stated that “it is necessary to ensure that the government’s economic policies and the Bank of Japan’s responses are closely coordinated.”
Diplomatic Security
The diplomatic calendar is also packed with international conferences, including the Association of Southeast Asian Nations (ASEAN) Summit and the Asia-Pacific Economic Cooperation (APEC) Summit, both of which will be held next week.
The Japan-US summit, which Kyodo News reports is being planned for the 28th, will likely include topics such as the management of the $550 billion (approximately 83 trillion yen) investment in the United States agreed upon by the Shigeru Ishiba administration, as well as increased defense spending. The governing agreement between the LDP and Ishin Party also clearly establishes a policy to push forward with the revision of three security-related documents, including the National Security Strategy.
