Japanese Prime Minister Sanae Takaichi delivered her first policy speech in the Diet following a landslide victory in the snap parliamentary elections on February 8. The head of government announced a radical departure from the policy of excessive budget austerity and a thorough reform of the national security strategy. Faced with growing pressure from China, Takaichi declared a tightening of cooperation with the US and massive investments in the AI, semiconductor, and modern defense technology sectors.

End of Fiscal Austerity

Prime Minister Takaichi announces a departure from excessive savings in favor of proactive state investments intended to stimulate the private sector.

New Security Strategy

Japan plans rearmament and a review of weapons export policy in response to military pressure from China.

Increase in State Budget

The budget draft for 2026 envisions spending of around 122.3 trillion yen, representing a significant increase compared to the previous financial plan.

Inflation at BoJ Target

January's core inflation was 2%, the lowest result in 24 months and aligning with the Bank of Japan's target.

Japanese Prime Minister Sanae Takaichi presented an ambitious state transformation plan in parliament, based on the slogan "Strong and Prosperous Japan." In her address to Diet lawmakers, the Prime Minister declared a definitive end to the long-standing fiscal policy based on excessive austerity. The government intends to "firmly press the growth button," promoting private investment and increasing state spending in key strategic sectors such as artificial intelligence and modern chips. The new budget draft for fiscal year 2026 envisions spending at a record level of over 122 trillion yen. Since the end of World War II, Japan has maintained a pacifist constitution limiting the military's role. Only in the last decade have Liberal Democratic Party governments begun gradually interpreting the provisions to enable the strengthening of defense capabilities in response to the regional situation.On security matters, Takaichi accused China of attempting to change the status quo in the region through force and coercion. She announced a revision of defense strategy, a relaxation of restrictions on military equipment exports, and securing supply chains. Simultaneously, the Minister of Foreign Affairs emphasized that Japan remains open to dialogue with Beijing, despite the ongoing diplomatic dispute. The Prime Minister, seen as the political successor to Shinzo Abe, is counting on close cooperation with Donald Trump to strengthen the alliance with Washington. Investors on the Tokyo stock exchange are closely watching these announcements, while the latest inflation data shows a slowdown to 2.0% in January. This is the lowest reading in two years, complicating the Bank of Japan's plans regarding the timing of a potential next interest rate hike. Takaichi sought to calm financial markets, promising that her policy would not be irresponsible and would aim to stabilize public finances through steady economic growth, not drastic cuts.

Mentioned People

  • Sanae Takaichi — The first woman to hold the position of Prime Minister of Japan, leader of the Liberal Democratic Party.
  • Donald Trump — President of the USA, mentioned by Takaichi as a key ally on security matters.
  • Satsuki Katayama — Minister of Finance of Japan, responsible for reforming the state's fiscal structure.