Reactions: Japan’s Ruling Party Elects Sanae Takaichi as New Leader

Following her victory in Saturday’s election to lead Japan’s ruling Liberal Democratic Party (LDP), Sanae Takaichi is poised to become the country’s first female prime minister. A former internal affairs minister known for her conservative nationalism and expansionist agenda, Takaichi will succeed Prime Minister Shigeru Ishiba, as the LDP remains the largest party in parliament.

Reactions from analysts and experts:

Tohru Sasaki, Chief Strategist, Fukuoka Financial Group and former Bank of Japan official, Tokyo:
“In the final debate between Koizumi and Takaichi, I thought Takaichi performed slightly better, which helped secure her victory. So, this outcome isn’t entirely surprising.
Takaichi was the most popular candidate among rank-and-file LDP members, which was a key factor in her win. Given her strong grassroots support, her cabinet is likely to enjoy high popularity, which could influence monetary policy. That might make it harder for the Bank of Japan to raise rates.
I expect the yen to weaken on Monday morning—dollar-yen could touch 150 or above, though such reactions are usually short-lived.
The stock market is likely to remain firm. The JGB market may be mixed—Takaichi’s policies could make rate hikes harder, lowering yields, but her spending plans could be negative for bonds, steepening the yield curve.
Overall, the markets may view this result positively, at least initially.
It will also be interesting to see how she engages with Trump—she’s likely to be a strong negotiator.”

Tomohisa Ishikawa, Chief Economist, Japan Research Institute, Tokyo:
“Takaichi has spoken of a ‘responsible expansionary fiscal policy.’ The key question is whether this can restore both fiscal health and economic growth. I expect renewed emphasis on fiscal consolidation.
However, since she has mentioned deficit-financed bonds as an option, there’s a risk of fiscal expansion, signaling a continuation of Abenomics.
For now, it seems the Bank of Japan will find it difficult to raise interest rates.
If ‘responsible expansionary policy’ means directing funds to high-growth sectors rather than blanket spending, equities could rise without excessive yen weakness.”

Kazutaka Maeda, Economist, Meiji Yasuda Research Institute, Tokyo:
“Among the five candidates, Takaichi stands furthest from outgoing Prime Minister Ishiba’s fiscal restraint, so markets may welcome her expansionary stance.
During the campaign, she toned down some of her more radical proposals, such as cutting the consumption tax. But if she revives such ideas in response to opposition demands, it could push interest rates higher, weaken the yen, and accelerate inflation—potentially undermining public trust.
Overall, doubts remain about her ability to govern effectively.
On monetary policy, she is not seen as supporting rate hikes, which could make it harder for the BOJ to tighten further. While rate increases can’t be ruled out, the central bank will likely proceed cautiously, perhaps delaying the next hike until early next year depending on inflation trends.”

Mari Iwashita, Chief Rate Strategist, Nomura Securities:
“BOJ Governor Kazuo Ueda has shown no urgency to raise rates, and Takaichi’s victory makes an October hike even less likely. Until political uncertainty settles and the new administration’s policy stance becomes clear, there’s little justification for the BOJ to move on rates.”

Naoya Hasegawa, Chief Bond Strategist, Okasan Securities, Tokyo:
“The likelihood of a BOJ rate hike later this month has diminished. Initially, markets will buy medium-term bonds and sell super-long bonds, steepening the yield curve.
The market previously saw over a 60% chance of a 0.75% hike, but that probability may drop below 50% next week.
Koizumi’s campaign and the hawkish tone from BOJ board member Asahi Noguchi had earlier strengthened rate-hike expectations.”

Toshinobu Chiba, Fund Manager, Simplex Asset Management, Tokyo:
“This is truly surprising. I expect the yen to depreciate and the JGB yield curve to steepen sharply. We’ll need to watch for the finer details of her policies.”

Yuka Hayashi, Vice President, The Asia Group, Washington, D.C.:
“Takaichi is a seasoned politician with some U.S. experience and a deep understanding of U.S.-Japan relations—that’s one of her strengths.
She’s said she believes she can build a strong personal rapport with former President Trump, as her ‘Japan First’ stance resonates with his ‘America First’ philosophy. However, she’s also a hardline conservative when it comes to Japan’s relations with its Asian neighbors.
Her assertive views on World War II legacy issues—such as repeated visits to the Yasukuni Shrine—could strain ties with South Korea and China.
Given the challenging period facing the LDP, I expect her to prioritize party unity and avoid taking overly hardline foreign policy positions.”