Bloomberg Audio Studios, podcasts, radio news. The nie Ki, of course, already at a record high after that historic landslide victory by Prime Minister Takaichi and her party.
Japanese stocks are on a tear this week.
As has welcome the resounding election win for promiss Sanai Takaichi, the LdB winning a standalone super majority, positioning her.
Japanese equities had searched like fresh record highs on Monday. Semiconductor stocks are doing really well. Defense related stocks are doing really well.
Sakura Murakami covers Japanese politics for Bloomberg out of Tokyo. She says the country stocks have gotten a big lift from Japanese Prime Minister Sanai Takeiichi's historic election win this past weekend.
I'm not sure anyone was really expecting this level of a landslide. Three hundred and sixteen seats gained only by the Liberal Democratic Party. That's the most seats ever for the LDP since is founding in nineteen six.
And that landslide victory came after Takichi made a big gamble. She came into power four months ago with the razor thin majority in parliament, but she wanted a mandate for a combination of conservative social policies and populist big spending pledges. So she called a snap election.
I think everyone was expecting the LDP and Takeichi to win, but not to this extent.
Takeiichi's win gives her ruling party an outright majority in Japan's lower house.
She'll be able to kind of push through a lot of the policies that she wants to do. She's pushed forward this idea of Japan being strong and assertive on the global scene, whether that's economically or militarily or diplomatically.
It's a historic win. But while she has the pace people behind her, the bond market remains skeptical of her plans for the economy.
The single biggest challenge that Takaichi faces now is delivering on her campaign promises. That's crucial both for markets and in terms of regaining investors' trust, and also politically. You know, if she's seen as weak or enabled to deliver on her promises, that's going to undermine her political strength as well. So it all comes down to the execution.
This is the big take Asia from Bloomberg News. I'm Wanha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever shifting region. Today, on the show Unpacking Sinai Takeiichi's landslide victory, what her vision for a more assertive free spending drip looks like, and can she sell anxious global investors on her bold but risky economic plans. When Sinnai Takeiichi called a nap election last month,
she was governing from a very shaky position. Her Liberal Democratic Party combined with its junior coalition partner, we're struggling to get by with a slim majority in parliament.
That means she had to do a lot of haggling, a lot of negotiating, a lot of discussing with smaller parties that had leverage over her because she didn't have a majority. She did have this razor thin majority in the lower House, which is more powerful, but it was two hundred and thirty three seats out of four hundred and sixty five. If one person couldn't make it to vote, she would have lost the majority. So that was how
close she was. And to consolidate her power to really push through the policies that she wanted to see implement that was a gambit that's obviously paid off.
Now Takeichi's viewed generally as a right wing conservative, but obviously the election results show that she has such massive, widespread public support. What's behind her broad appeal.
When I was at her rally, I noticed that she would go into her politicies, and the crowd responded the most when she talked about a strong independent Japan, and that wasn't strong and independent in terms of just the military and defense, but in terms of the economy. So when she talked about rare earth and not being so reliant on certain countries for rare earth supplies, she got
like big cheers basically. So I think that goes to show that people have been concerned about the economy and they see the strength that she's portraying and that she's trying to present to the public as a way forward, something they can be hopeful about for the future.
And she's hugely charismatic, especially with her personal story, right.
She's got a great personal story. She rides motorbikes, heavy metal drummer. She's a drummer. When she was in university, you know, she would rock up to her classes with pink hair. She had long hair had pink streaks in them. She's such a character and you can see that in the way that she presents herself on social media as well. So one of the moments that went viral for her was this big hug that she gave Italian Prime Minister
Georgia Maloney at the g twenty last year. It was the first time that they met, but their eyes locked across the room and they just like jumped into this huge embrace, which kind of went viral. And it's very unusual for a Japanese leader, I think, to have that level of closeness immediately and immediate rapport with a foreign leader.
Now, Taki she styles herself as a conservative, but some say her economic strategy isn't what you expect of a conservative. Talk is through her political branding and what her particular vision of conservatism looks like.
So she kind of takes all those boxes of like a standard Japanese right wing politician. She wants to see a strong Japanese military, she wants to take a bold stance on China. So those are classically politically conservative issues
in Japan. Economically, though, I think Takaichi wants to see a kind of rejuvenation of the Japanese economy, and that also includes letting companies fail, which was not really something politicians wanted to do previously, especially in terms of winning votes and having the political strength that comes from these sorts of companies that aren't doing too well but are being propped up by subsidies from the government. And I
think the focus is on productivity. Where can Japan's economy be more productive and what areas is the Japanese government subsidizing that isn't actually as productive as it could be. And that is very much focused on investing in the areas that need investment, but then slimming down the government and being very efficient in governmance in general.
Now Techichi and her Liberal Democratic Party have secured a super majority in the important lower house. What does this mean for her politically and the party's ability to push through its agenda.
Now this is huge for Takeichi because it gives her such a huge mandate. The ruling coalition still doesn't have a majority in the upper house, so there is that roadblock. But if you have a supermajority in the lower house, the lower house is more powerful than the upper house, and it can overrule the Upper House, so that just gives her so much of a free hand to push
through the policies that she wants to see implemented. Overall, it's about spending more investing in the areas that need investment and seeing Japan's economy grow again, investing in an economy for Japan that actually sees more growth, like semiconductor
related sectors and defense companies. She's talked so many times on the campaign trail about this island off the coast of Japan, Minami Tadishima, that has apparently has rare earth, and she's talking about digging up these rare earths to ensure that Japan isn't so reliant on other countries or a single country for its supply chain of rare earth. So this is kind of like the idea, the vision that she has for Japan.
Voters love Prime Minister Sanaitakiichi and overwhelmingly back her vision for more assertive but the bond market is spooked by her fiscal policies, why her spending plan could be risky, and what her win means for Japan's geopolitical ties. That's after the break Japan has grappled with economic stagnation for decades, but inflation kicked in during the pandemic bloomberg. Zakura Murakami says that it's now one of the most pressing issues facing the government.
So Japan in the past thirty years hasn't seen prices rise at all. That's a whole generation of people who have not experienced inflation. But now in the past couple of years or so, we're actually seeing inflation in earnest. One of the most emblematic changes is the price of rice. It doubled in about a year, and rice is basically like the eggs or you know, the bread of the
average household in Japan. It's the staple grain. Before you know, the price of everything has just gone up, and this is really weighing on the average Japanese household.
To help families struggling with inflation, Takeiichi promised a two year cut to the sales tax on food and non alcoholic drinks, but it was a controversial pledge. The move would cost about thirty two billion dollars in lost revenue annually. That's about six percent of what the country collects in taxes.
Sakura says that investors were already uneasy about Japan's massive public debt, the highest among developed nations, and they're now rattled about a big spending plan with no clear way to pay for it.
When she started her campaign, she put the sales tax cut on food front and center. Through the campaign trail, she's really toned down that messaging. She barely mentioned the sales tax cut in her rallies in her speeches while she was on the campaign trail. I think that goes to show the impact the market jitters. Since the election win, she's said, well, continue to discuss this. Takayji herself has also said, as has the Finance Minister Katayama, that the
planned tax cut wouldn't require additional bond issuance. They've kind of said, we are going to spend aggressively, but an important part of that is also spending responsibly. I think it's difficult for Takaichu to back out of it at this point, but you know, it is really about showing that this is doable, this is feasible, that there is alternative funding, and we haven't seen that yet.
Yeah, that seems to be important since we obviously in the last few weeks we saw meltdown in Japan's bond market, right, is the election results you think like to calm nerves in the long run or does it make investors even more jittery now that she has public support to push her spending policy through.
So far there's relative calm in the currency. Also in the fixed income markets, we're not seeing the kind of meltdown that we saw with Liz Trust when she announced her kind of physical plans. So I do think the aggressive spending part, the sort of tax cut part, tends to get more play, but she is really trying to
emphasize the responsible part of it. She has been consistent about saying the plan tax cut won't require additional bond issuance, and that's kind of part of the fiscal finance that she's trying to portray as well.
So Gurda, I do want to pivot to geopolitics. Takichi made headlines shortly after becoming Prime Minister with controversial remarks that suggested Japan could intervene militarily if chinad tag Taiwan. Of course, that's stoked tensions with China that are still simmering today. With her win at the polls, are we likely to see Taki she really doubled down on that Hawker stance on China.
Yeah, part of her appeal has been this kind of strong stand she's taken with China and just in general, she's like very straightforward, and I think this kind of unwillingness to back down under the economic pressure of China after her comments on Taiwan really appealed to the public. Polls showed that the general public was kind of generally in favor with Takaichi's comments and also with how Takaichi handled the issue that being said. You know, as I
mentioned earlier, she's a conventional right wing politician. I think one of the things, for example, that she would want to do personally is visit Yeskuni Shrine, which is a very controversial shrine that honors the Japanese warted, but also war criminals passed. Visits to the shrine by Koizumi by Abe have really angered, for example, China and South Korea.
When she was asked about a potential visit to Yescony yesterday after the election, she said she wanted to create an environment where all countries and all people can honor the war dead in the way that they want to.
Now, we saw President Donald Trump indoors Takeichi before the election, and he since congratulated her on the win. US Treasury Secretary Scott Bessont also wighed in.
Boy, has she had a big victory today President Trump in doorst last week. She is a great ally, great relationship with a president. And when Japan is strong, the US is strong in Asia.
I wonder what we can expect out of these warmer US Japan ties. Japan is a US ally sitting right next to the biggest US rival, China? How is she going to navigate being sandwiched between the to global rivals on the world stage.
So she's very much sort of leaning into her personal relationship with Trump. They have this natural rapport. She'll be going to the US in March ahead of Trump's visit to China. Trump has always grumbled about the US having to defend other countries and other countries not really paying up for their own defense, and Takaiji is aligned on that thinking. She wants Japan's military to be stronger. She
wants Japan to be capable of defending itself. So when she goes to the US in March, that'll probably be a topic of discussion between them. Takaichi already has plans to revise Japan's defense spending and Japan's defense policy as well. On the other hand, China's not going to be too happy about that, but that also plays into Takaichi's sort of policy with China. In the four months that she's been in office, she's already taken quite a strong stand
against China. She's been very firm about holding her ground and I think we'll see more of that during her term. And obviously, Japan's economy is very reliant on China's economy as well. There's a very strong trade relationship there, but Takichi maybe looking into decoupling and making Japan more assertive and independent in that respect as well.
With this huge mandate that Takichi and the party is won, she has the power to move her agenda forward. How do you think that changes her political calculus going forward.
I mean, she's been in office for four months and the budget that she has passed so far was the budget from a previous prime minister. So this is the first time that she can actually do things her own way and pull together a budget that she wants to push through. And obviously, with the huge mandate, from the public. She'll be able to push it through Parliament as well.
So far, given that her hands were tied politically, given that she didn't have a clear majority, she didn't quite have the space to maneuver in the way that she wanted to. But now she has a clear mandate. The question now is how effectively can she actually implement the policies that she's pledged so far. It's been some talk for some time, but will we actually see these policies being realized and actually implemented.
It sounds like this is actually where the hard work comes in.
Right after this, Yeah, right after the Big Wing exactly. Yeah.
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