HONG KONG, Feb 9 (Reuters Breakingviews) - Sanae Takaichi has curb-stomped the competition. Her Liberal Democratic Party took 316 out of 465 seats in Sunday’s snap election for Japan’s powerful lower house, delivering the arch-conservative prime minister her country’s first post-war single-party supermajority. Investors may hope the ruling party’s historic comeback relieves pressure to cooperate with a fiscally profligate opposition. But Takaichi’s stated ambitions to revitalise the heavily indebted $4 trillion economy show she needs no excuse to push government spending through the roof, auguring more turmoil for markets.

Her own words, delivered as results came in, crystallise that resolve: “This election involved major policy shifts — particularly a major shift in economic and fiscal policy, as well as strengthening security policy”. That’s despite the yen weakening more than 6% against the U.S. dollar since she took charge in October, with yields on long-dated government bonds jumping to record highs on concerns over spending. Now she’s poised to double down, making each part of her policy triptych worth taking seriously.

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The prime minister argues Japan’s economy needs a shot in the arm for wages to surpass rising costs and restore confidence. But data released, opens new tab on Monday show real wages sank every month in 2025. Takaichi’s election promise to suspend Japan’s 8% sales tax on food will probably boost inflation.

She has also endorsed a return to the sprawling fiscal stimulus of former Prime Minister Shinzo Abe, hypothetically enabling Japan to spend its way to growth robust enough to overcome any concerns over growing debt or new gaps in the tax base.

Those worries also apply to her third big shift, in security policy. Her cabinet already approved a record 9 trillion yen ($57 billion) for defence in response to military pressure from China and spending demands from the U.S. The new supermajority removes one major barrier to revising Japan’s pacifist constitution, allowing its self-defence force to become a proper military. A required two-thirds vote in the upper house and a national referendum make that unlikely in the near term. But Takaichi’s desire for a regular army makes expensive militarisation look more certain.

The borrowing necessary to pay for all this is likely to push up the cost of issuing bonds, driving yields higher and weakening the yen. That will further raise costs for import-dependent Japan, reinforcing inflation in a trend the central bank has already warned could trigger quicker interest rate hikes that make debt issuance still more costly.

The Nikkei 225 stock Index (.N225), opens new tab hit a new record high on Monday on the prospect of stimulus, yet pushback from bond investors and the Bank of Japan may ultimately rein in the most fiscally irresponsible of Takaichi’s aims. With a thundering political mandate in hand, any hopes she won’t give her policy goals an earnest shot look badly misplaced.

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Context News

• Japan’s ruling Liberal Democratic Party won 316 of 465 seats up for grabs in the February 8 snap election for the parliament’s powerful lower house, delivering a supermajority to Prime Minister Sanae Takaichi.
• The arch-conservative leader has pledged to suspend an 8% sales tax on food, called for a return to the large-scale fiscal stimulus deployed by former Prime Minister Shinzo Abe and said she wants to revise Japan’s pacifist constitution.
• Expectations of higher government spending have driven yields on long-dated Japanese government bonds to record highs and weakened the yen more than 6% against the dollar since Takaichi became LDP leader in October.

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Editing by Antony Currie; Production by Aditya Srivastav

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Hudson Lockett

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Hudson Lockett is the Asia Columnist for Reuters Breakingviews in Hong Kong. Before joining Reuters in 2024, Hudson spent seven years at the Financial Times, most recently serving as the paper’s Asia capital markets correspondent. Prior to this he was editor of China Economic Review in Shanghai. Hudson has degrees in Journalism and Japanese from The University of Texas. He speaks Chinese.

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