By Julien GIRAULT AFP

Japanese stocks soared to record highs Monday after Prime Minister Sanae Takaichi’s election triumph, but experts warned that the country’s first woman leader could struggle to keep both voters and markets happy.

In its best result since its founding in 1955, Takaichi’s conservative Liberal Democratic Party won a two-thirds majority in Sunday’s snap lower house election, according to Japanese media.

With the result, Takaichi, 64, managed to capitalise on her strong popularity since taking the helm of a moribund LDP in October and becoming Japan’s fifth premier in five years.

On Monday the Nikkei 225 briefly jumped more than five percent to pass 57,000 points for the first time, while the yen strengthened against the dollar.

Analyst Kyle Rodda of Capital.com said the victory handed Takaichi “the mandate she was looking for for her big-spending agenda”.

Equities are “poised to benefit from higher fiscal spending but interest rates that remain accommodative and negative in real terms”, he said.

And SPI Asset Management’s Stephen Innes said: “Politically, the win hands… Takaichi freedom of movement and removes the need to bargain every decision down to the lowest common denominator.”

But a major reason for voters deserting the party in past elections was inflation, an unwelcome phenomenon for households after several decades of stable or falling prices.

The cost of rice, for example, doubled in 2025.

– Food tax –

After a $135-billion stimulus last year, economists said Takaichi’s room for manoeuvre was limited because of market concerns about Japan’s debt, which at more than twice the size of gross domestic product is a bigger ratio than any other major economy.

The yen has also weakened, prompting speculation that Japanese authorities — potentially in partnership with US officials — might intervene to provide support.

Off-the-cuff remarks by Takaichi earlier this month talking up the benefits for Japanese exporters of a weaker yen added to pressure on the currency.

In the election campaign Takaichi floated the idea of suspending a consumption tax on food items, but this sent yields on long-term Japanese bonds to record levels.

On Sunday she told local media further discussions were needed on such a move, which Bloomberg News reported would cost 5 trillion yen ($32 billion) in lost annual revenue.

“Most parties are in favour of reducing the consumption tax… I strongly want to call for the establishment of a supra-party forum to speed up discussion on this, as it is a big issue,” Takaichi said.

She also reiterated her mantra of having a “responsive and proactive” fiscal policy.

But she added: “We will ensure necessary investments. Public and private sectors must invest. We will build a strong and resilient economy.”

– ‘Betrayed’ –

Tetsuo Kotani at the Japan Institute of International Affairs said Takaichi could struggle to keep voters happy and that they could end up feeling “betrayed”.

“In reality, the policies of a Takaichi administration are unlikely to curb the inflation that voters expect her to address,” he warned.

“An income tax hike linked to increased defence spending will also be unavoidable. If these policies lead to a triple decline in stocks, the yen, and government bonds, people’s lives will become even more difficult.”

Takaichi has also pledged to increase defence spending as part of commitments to US President Donald Trump that Japan will be less reliant on Washington.

Kotani said that because of a personnel shortage — linked to Japan’s low birth rate — this will “not amount to a fundamental strengthening of Japan’s defence capabilities”.

Marcel Thieliant at Capital Economics added that he did not expect Takaichi to embark on any new major spending splurges or tax cuts.

“(We) view the recent fiscal expansion as an attempt to bolster public support ahead of the election rather than as a sign of things to come,” he said in a note.

“With Upper House elections not due until 2028, we don’t expect any further major fiscal loosening.”

Hiroshi Shiratori, politics professor of Hosei University, said Takaichi wanted to emulate the “Abenomics” of former premier Shinzo Abe — her mentor — of big spending and lower interest rates.

“But Abemonics was done at the time of deflation in Japan and a higher yen,” Shiratori told AFP.

“Now is the time of inflation, and the cheaper yen exacerbating inflation, with the market reacting on worries over potential worsening of fiscal conditions,” he said.

“But not all voters understand this logic.”

Japan votes in snow-hit snap polls as Takaichi eyes strong mandate

By Kyoko Hasegawa and Caroline Gardin AFP

Japan voted in snow-hit snap elections Sunday with Prime Minister Sanae Takaichi hoping to turn a honeymoon start into a resounding ballot box victory that could rile China and rattle financial markets.

Opinion polls suggest that Takaichi’s Liberal Democratic Party (LDP), which has governed almost non-stop for decades, will easily win more than the 233 seats needed to regain a majority in the powerful 465-member lower house.

Heavy snowfall blanketed many parts of the country on election day, including Tokyo and other regions that rarely see winter snow.

“I think it’s important to come, so that we can properly take part in politics as well,” a 50-year-old woman, who only disclosed her surname as Kondo, told AFP near a voting station in Tokyo.

“Even if it snows more than it does now, I still plan to go,” she added.

“I struggled to find a way to the ballot box as snow was accumulating around it, and it was a pain to arrive here with bad road conditions,” a man in his 70s in Aomori in northern Japan told public broadcaster NHK.

“I wish the election was held in a snowless season,” he said. It is the first time in decades that Japan holds a general election in snowy February.

Pollsters even suggest — with some caution due to undecided voters and wintry weather — that the LDP and its coalition partner could secure 310 seats needed for a handy two-thirds majority.

This would be the best result for the LDP since 2017 when Takaichi’s mentor, the late ex-premier Shinzo Abe, achieved a similar result.

Takaichi was a heavy metal drummer in her youth, an admirer of Britain’s “Iron Lady” Margaret Thatcher, and on the ultra-conservative fringe of the LDP when she became leader in October.

She has defied pessimists to be a hit with voters, especially young ones, with fans lapping up everything from her handbag to her jamming to a K-pop song with South Korea’s president.

– Pandas and public debt –

Takaichi has however not had everything her own way, in particular with regard to worries about her stewardship of the public finances of Asia’s number-two economy.

She followed up a $135-billion stimulus package aimed at easing the pain of inflation — a big cause of voter discontent — with a campaign promise to suspend a consumption tax on food.

Japan’s debts are more than twice the size of the entire economy, and in recent weeks yields on long-dated bonds have hit record highs while the yen has seesawed.

Takaichi “always talks about taking responsibility through expansionary fiscal policy, and I don’t know whether that will actually lead us in a better direction,” Chika Sakamoto, 50, told AFP as she visited a voting station in Tokyo.

“Still, I wanted to see what would happen if they pursued aggressive fiscal spending,” hoping that it would ease impact of rising prices on household income, she said.

Barely two weeks in office, Takaichi — seen before assuming the premiership as a China hawk — suggested that Japan could intervene militarily if Beijing sought to take self-ruled Taiwan by force.

China regards the democratic island as part of its territory and has not ruled out force to annex it.

With Takaichi having days earlier pulled out all the stops to welcome US President Donald Trump, Beijing’s reaction to her unscripted remarks was furious.

It summoned Tokyo’s ambassador, warned its citizens against visiting Japan and conducted joint air drills with Russia. Last month, Japan’s last two pandas were even returned to China.

Trump has not publicly weighed in on the spat but last week endorsed Takaichi as a “strong, powerful, and wise Leader, and one that truly loves her Country”.

Margarita Estevez-Abe, associate professor of political science at Syracuse University, said that the China episode raised Takaichi’s popularity even more.

“Now she doesn’t have to worry about any elections until 2028, when the next upper house elections will take place,” Estevez-Abe told AFP.

“So the best scenario for Japan is that Takaichi kind of takes a deep breath and focuses on amending the relationship with China.”

Voting stations were due to close at 8:00 pm (1100 GMT) with media predictions based on partial results expected soon afterwards.