Sanae Takaichi has been officially re-elected by the Japanese parliament to the position of prime minister following the Liberal Democratic Party's landslide victory in the February 8 elections. The new administration has announced the continuation of an assertive security policy and the implementation of a stimulus package based on tax cuts. Despite optimistic data from industry and the stock market, Prime Minister Takaichi must contend with IMF warnings regarding the fiscal risks associated with the consumption tax reduction.

Approval of the Second Cabinet

The Japanese parliament officially elected Sanae Takaichi as prime minister, who decided to maintain the composition of her previous government to ensure political continuity.

Record Economic Indicators

The industrial PMI index reached its highest level in four years (52.8), and machinery orders increased by nearly 20% at the end of the year.

Warnings from the IMF

The International Monetary Fund appealed to Japanese authorities to abandon the plan to reduce the consumption tax out of concern for the erosion of fiscal space.

On Wednesday, Sanae Takaichi was formally approved by both houses of the Japanese parliament for the position of prime minister, paving the way for the formation of her second cabinet. Victory in the lower house, the House of Representatives, was a formality after the Liberal Democratic Party (LDP) secured a supermajority there. The prime minister decided to retain all incumbent ministers, which is intended to guarantee stability in implementing key reforms. The main goal of the new term is economic revitalization through active investment in strategic technologies and a controversial, two-year reduction of the consumption tax. Macroeconomic data favors the new beginning. Activity in the manufacturing sector, measured by the PMI index, rose in February to 52.8 points, representing the fastest pace of expansion in four years. Furthermore, machinery orders in December increased by a record 19.1%, signaling strong investment optimism in the private sector. The stock market in Tokyo reacted positively, and the inflow of foreign capital in mid-February reached its highest level since 2014, exceeding $11.5 billion. Investors are counting on political stability and state support for domestic industry. The Liberal Democratic Party has dominated the Japanese political scene almost continuously since 1955, with brief interruptions in the 1990s and at the turn of the first and second decades of the 21st century. Sanae Takaichi is the first woman to lead this party and the government, drawing on the economic legacy of Shinzo Abe. „We will strive to implement responsible fiscal policy that simultaneously stimulates private investment in key sectors of our economy.” — Sanae Takaichi Despite market euphoria, the government faces serious challenges. The International Monetary Fund (IMF) issued a clear warning against the planned tax cuts, pointing to the threat to the stability of Japan's public finances given the country's record debt. The dispute with the Bank of Japan over the 2% inflation target and the need to renegotiate key national security documents will test the unity of the new cabinet. Takaichi announced that the priority now will be passing the budget for the 2026 fiscal year before the end of March. LDP: 30.1, Other parties: 69.91.78 trillion yen — capital inflow from foreign investorsGovernment Formation and Reform Timeline: — ; — ; — ; — Changes in Economic Policy: : → ; : → Emphasizes fiscal risks and IMF concerns about public finance stability and the necessity of social reforms. | Focus on record PMI growth, foreign capital inflow, and the mandate for assertive defense policy.

Mentioned People

  • Sanae Takaichi — Prime Minister of Japan and chairperson of the Liberal Democratic Party, re-elected following victory in the February elections.
  • Kazuo Ueda — Governor of the Bank of Japan, with whom the prime minister consults on the coherence of monetary and government policy.