Japan’s newly reaffirmed Prime Minister Sanae Takaichi held a major press conference on Wednesday, February 18, outlining her government’s priorities for what she called the “Takaichi Cabinet 2.0.” At the center of her remarks was a firm commitment to what she describes as “responsible fiscal expansion,” signaling a potential departure from decades of postwar fiscal orthodoxy.
Takaichi, who secured the largest-ever electoral victory for the Liberal Democratic Party (LDP) in last month’s general election, emphasized that her government’s immediate task is passing the FY2026 budget. She stressed her determination to finalize it before March 31, the close of the fiscal year 2025. While some LDP lawmakers have expressed concern that moving forward after only a month of deliberation could spark backlash, Takaichi insisted that swift action is essential to signal her administration’s priorities.
Beyond the budget, Takaichi outlined broader objectives for the year, including “fundamentally strengthening security policy,” “enhancing government intelligence operations,” and pursuing social security and tax reform. A key element of this reform agenda is a national conference examining whether to cut the consumption tax on foodstuffs, a move that has both political and economic implications.
However, Takaichi made it clear that the linchpin of her administration’s agenda is fiscal expansion. “At the heart of the Takaichi government’s policy shifts,” she said, “is responsible fiscal expansion.” Her vision is to deploy Japan’s fiscal resources strategically to encourage domestic investment, strengthen industrial capacity, and bolster national defense.
To achieve these goals, Takaichi and Finance Minister Satsuki Katayama are considering a structural shift in Japan’s budgeting process. Rather than relying heavily on supplemental budgets, the government plans to move toward larger general budgets, multi-year appropriations, and long-term funds to support policy priorities.
This approach reflects a broader ambition to reform fiscal governance. Takaichi’s government seeks to pursue balanced budgets over a multi-year horizon rather than on an annual basis, downplay the significance of Japan’s gross debt, and emphasize the potential for growth to outpace debt accumulation. These policies, if implemented, would curb the influence of the Ministry of Finance (MOF), which conservative LDP members have identified as the primary obstacle to fiscal flexibility.
There is little indication that Takaichi is wavering on her commitment. Analysts note that even the potential pressures of a consumption tax cut are unlikely to push her toward fiscal restraint. Politically, abandoning her platform would contradict the promises she made during her leadership campaign and could undermine her credibility with a party caucus that overwhelmingly supports her.
Takaichi’s belief in fiscal expansion is not merely opportunistic; it reflects a long-standing ideological position. While she was largely silent on fiscal policy during her earlier tenure in LDP cabinet and party posts, her leadership campaigns and writings since 2021 have clearly articulated a framework for what she calls “Sanaenomics.”
Her 2021 campaign book, Toward a Beautiful, Strong, and Growing Country, deliberately echoes former Prime Minister Shinzo Abe’s Toward a Beautiful Country, and sets out a fiscal philosophy designed to continue where Abenomics left off. She criticizes traditional fiscal orthodoxy, arguing that a strict primary fiscal surplus target had “forced austerity to continue and made it difficult to achieve the price stability target.”
Instead, under Sanaenomics, flexible fiscal stimulus is reserved for emergencies, while large-scale investment is directed at growth and “risk management.” She wrote that until Japan achieves its two-percent inflation target, primary balance rules should be temporarily suspended to prioritize bold fiscal action. Issuing government debt is framed not as a risk but as a necessary source of funds for strategic national priorities, with attention to debt-to-GDP ratios maintained to ensure medium-term fiscal responsibility.
Takaichi has repeatedly highlighted that a strong economy is indispensable not just for fiscal reconstruction but also for enhancing Japan’s social security, national defense, and broader international influence. She emphasizes that investments in strategic sectors – including artificial intelligence, semiconductors, next-generation energy, robotics, quantum computing, supply chain resilience, and cybersecurity – are central to realizing Japan’s long-term national strength.
Takaichi’s embrace of expansionist fiscal policy is also supported by the broader ideological shift within the LDP right. Conservative lawmakers increasingly view fiscal restraint as an obstacle to national strength, particularly in defense and industrial policy. Analysts trace this evolution to the post-Koizumi era, when debates over consumption tax hikes and primary surplus targets created a divide between fiscal orthodoxy and growth-oriented conservatives.
Hidenao Nakagawa, the LDP’s secretary-general during Abe’s first term, was an early proponent of growth-driven fiscal strategy. His arguments that Japan could achieve fiscal sustainability by prioritizing investment helped frame subsequent debates within the party. These discussions evolved further during Abe’s second administration, especially after the 2014 consumption tax hike triggered economic contraction and intensified conservative skepticism toward the MOF’s fiscal policies.
Groups such as the Study Group for Japan’s Future and the Fiscal Policy Review Headquarters emerged to provide institutional support for conservative fiscal doves, advocating for the relaxation of primary balance rules and the expansion of deficit spending for strategic priorities. These groups formed the core of what would become the Parliamentarians’ League for Responsible Fiscal Expansion, which now counts more than 100 younger LDP members and several key figures in Takaichi’s cabinet as members, including Finance Minister Katayama and Economic Revitalization Minister Kiuchi Minoru.
The late Shinzo Abe’s post-premiership views also reinforced Takaichi’s approach. After leaving office, Abe became a vocal critic of MOF orthodoxy, framing the ministry’s insistence on balanced budgets as a hindrance to national strength. In December 2021, he countered a MOF essay warning of Japan’s fiscal crisis by asserting that government debt held predominantly by the Bank of Japan was not a concern, framing it as a matter of national self-financing.
Abe’s posthumous memoirs further highlighted his hostility to MOF, warning that the ministry would actively undermine any administration that did not conform to its fiscal orthodoxy. For Takaichi and other LDP conservatives, Abe’s example serves both as a political guide and as a reinforcement of the ideological rationale for expanding fiscal authority and limiting MOF’s influence.
Takaichi’s fiscal vision is supported not only by ideology but also by a network of seasoned policymakers who have long advocated for expansive fiscal measures. Figures such as Hiroyuki Nakamura, a vice minister of education, and Masaaki Akaike, a former upper house lawmaker, have been integral to Takaichi’s leadership bids and continue to champion fiscal expansion within the LDP.
This network provides continuity in personnel and policy. These individuals have roots in earlier pro-growth factions, linking Takaichi’s current administration directly to long-standing debates within the party over the balance between fiscal discipline and strategic investment. The presence of multiple cabinet ministers and advisers committed to fiscal expansion signals that the Takaichi government is positioned to pursue a sustained agenda of government-led investment and spending.
Takaichi’s fiscal policies also enjoy a degree of public support. Surveys conducted after the general election indicate broad approval of her “responsible fiscal expansion” approach, with 77% of respondents expressing support according to a Yomiuri Shimbun poll. Opposition to her strategy remains limited, with only 18% of respondents disagreeing.
Public sentiment toward the MOF is more explicitly negative in some quarters. Protests outside MOF headquarters and nationwide campaigns advocating for the ministry’s dismantling have gained traction, reflecting a broader cultural skepticism toward fiscal orthodoxy. Right-wing columnists and economists have further popularized this view, framing MOF as an obstacle to national growth and modernization. Hashtags such as #ZaimushoKaitai have amplified this sentiment online, and the association of MOF with entrenched postwar constraints has resonated with younger voters and LDP conservatives alike.
Polls on specific policy measures reveal a more nuanced picture. While the public generally supports increased government spending, there is some hesitancy regarding deficit-financed initiatives such as a consumption tax cut. For example, a Sankei Shimbun poll found that only 33% of respondents favor cutting the consumption tax if it entails issuing more deficit bonds. Similarly, opinions are split on whether higher defense spending should be funded through debt, taxation, or not increased at all. Nevertheless, these divisions are unlikely to derail Takaichi’s agenda as long as she maintains high approval ratings and legislative dominance.
Takaichi’s emphasis on fiscal expansion is not merely domestic economic management; it carries significant implications for Japan’s long-term strategic posture. By leveraging government resources to stimulate investment in technology, defense, and infrastructure, her administration aims to strengthen Japan’s industrial base, enhance national security, and increase resilience against global economic and geopolitical shocks.
The sectors prioritized under Takaichi’s framework – AI, semiconductors, robotics, sustainable energy, quantum computing, cybersecurity, and supply chain resilience – reflect an integrated vision that aligns economic growth with strategic imperatives. Investments in these areas are intended to both boost productivity and secure Japan’s technological autonomy in a world where supply chain vulnerabilities have become increasingly apparent.
Despite the apparent consensus within her party and support from the public, Takaichi’s fiscal expansionist policies carry potential risks. Critics argue that increased government borrowing could unsettle financial markets or trigger inflationary pressures. High-profile economists, including former Bank of Japan governor Haruhiko Kuroda and Koichi Hamada, have voiced skepticism regarding the sustainability of deficit-financed growth.
However, Takaichi appears prepared to accept these risks in pursuit of her broader policy objectives. Her commitment to multi-year budgeting, investment in strategic industries, and careful monitoring of debt-to-GDP ratios reflects an effort to balance expansion with long-term fiscal responsibility. Analysts note that the administration’s focus is on using debt as a tool for growth rather than a source of fiscal distress, aligning with principles of Modern Monetary Theory embraced by her LDP allies.
Political logic strongly supports Takaichi’s fiscal agenda. Having campaigned on expansionist fiscal policies and secured a historic majority for the LDP, she possesses both the mandate and the political capital to pursue her vision. Abandoning these principles would contradict years of advocacy, disrupt alignment with key cabinet members and advisers, and risk alienating the party’s conservative base.
Observers emphasize that Takaichi’s actions should be understood within the broader trajectory of Japanese conservatism, which increasingly prioritizes growth-oriented fiscal strategies over strict orthodoxy. The alignment of ideology, personnel, and public sentiment suggests that her administration is likely to pursue aggressive fiscal measures regardless of short-term criticism or potential market concerns.
Wednesday’s press conference signaled the Takaichi government’s readiness to confront institutional and market constraints in order to implement a bold fiscal agenda. Analysts anticipate a focus on multi-year budgetary frameworks, targeted investment in strategic sectors, and reforms designed to curb MOF influence over spending decisions.
Given the political, ideological, and public factors supporting her agenda, Takaichi is positioned to test the boundaries of Japan’s fiscal capacity. While debates over specific tax measures and deficit financing will continue, there is little reason to doubt the fundamental direction she has set for the Takaichi Cabinet 2.0: a government actively deploying fiscal resources to strengthen Japan economically, technologically, and strategically.
Whether this strategy will achieve the balance between growth, national security, and fiscal sustainability remains a central question for the coming year. Yet, in a political environment where her mandate is strong and her ideological convictions deep, the trajectory is clear: Japan is entering a period of assertive government-led investment, structural fiscal reform, and a potential redefinition of the role of the MOF in shaping national policy.
In sum, Takaichi’s reaffirmation as prime minister is less a routine transition than the beginning of a concerted campaign to reshape Japan’s economic and strategic policy framework. Her focus on “responsible fiscal expansion” encapsulates a vision that has been years in the making, drawing on the influence of mentors, ideological allies, and a political cohort committed to redefining Japan’s approach to public finance. The months ahead will test the effectiveness and resilience of this strategy, both in Tokyo and across global markets, but the direction is unmistakable: under Takaichi, Japan is preparing for a new fiscal era, one in which the government actively invests in its priorities rather than being constrained by entrenched orthodoxy.
