Japan Prime Minister Sanae Takaichi retains key ministers in first cabinet reshuffle

Core cabinet retained for continuity

Japanese Prime Minister Sanae Takaichi conducted her first cabinet reshuffle on Thursday, keeping key ministers across finance, foreign affairs, and defense. Takaichi, who took office in October 2025 as Japan's first female leader in modern history, sought to stabilize her standing as public approval fell to approximately 50%, down from 70% at the start of her term. The appointed ministers attended an attestation ceremony with Emperor Naruhito at the Imperial Palace in Tokyo. Foreign Minister Toshimitsu Motegi and Defense Minister Shinjiro Koizumi both kept their posts despite previously contesting the party leadership against Takaichi. Finance Minister Satsuki Katayama and Chief Cabinet Secretary Minoru Kihara also remained in office. Nomura Research Institute economist Takahide Kiuchi evaluated the appointments ahead of the 2027 leadership race.

Rather than going for stronger appeal on her policy colour, Takaichi is likely prioritising policy continuity and stability to lay the groundwork for re-appointment in the ruling party leadership race in September next year.

Economic policy and tax proposals

The retention of Katayama and Economy and Fiscal Policy Minister Minoru Kiuchi maintains Takaichi's economic framework as public debt exceeds twice the size of the national economy. Benchmark 10-year government bond yields reached three-decade highs around 3% following plans for a two-year cut to the consumption tax on food and drinks from 8% to 1%. The measure carries an estimated cost of 5 trillion yen (28 billion euros) and heads to an extraordinary parliamentary session in October. Takaichi also retained Trade Minister Ryosei Akazawa to handle trade negotiations with Washington. On foreign exchange markets, the yen traded around 155.50 per dollar on Thursday after a US Federal Reserve rate hike, compared with 152.89 earlier in September. Minoru Kihara reiterated government policy following the joint July 31 yen-buying intervention with the United States.

We will continue to communicate closely with the US Treasury Department and strive towards maintaining an orderly currency market.

Coalition entry and party balance

The reshuffle brought coalition partner Japan Innovation Party into executive government for the first time. Hiroshi Nakatsuka of the Japan Innovation Party assumed office as Minister for Regulatory Reform, Administrative Reform, and Children's Policy. In internal affairs, Hisayuki Fujii replaced Takaichi's former leadership rival Yoshimasa Hayashi. The administration maintained two female cabinet members, with Economic Security Minister Kimi Onoda remaining alongside Katayama. Within the Liberal Democratic Party, Wednesday's leadership reorganization retained former prime minister Taro Aso as vice president, Shunichi Suzuki as secretary-general, and Takayuki Kobayashi as policy research council head.

Defense posture and diplomacy

Defense Minister Shinjiro Koizumi continues overseeing revisions to Japan's defense strategy amid requests from US President Donald Trump for higher military expenditures and trade commitments. Koizumi addressed reporters after his reappointment.

Revising our strategy is an enterprise that has an impact on the security of Japan and the entire region.

Diplomatic priorities include Takaichi's scheduled attendance at the United Nations General Assembly in New York, where officials seek a meeting with Trump before his planned 24 September talks with Chinese President Xi Jinping. Tensions with Beijing have persisted since Takaichi stated last year that Japanese forces could intervene if China took military action against Taiwan. Meanwhile, the Bank of Japan convenes on Friday to consider raising interest rates to 1.25%, a 31-year high, while coordinating with the government toward its 2% inflation target.