Sanae Takaichi's surprise victory in Japan's LDP leadership race positions her to become Prime Minister, potentially unsettling investor confidence given her 'fiscal dove' policies advocating higher spending and tax cuts while criticizing BOJ rate hikes. Her nationalistic stance, including a potential 'quasi-security alliance' with Taiwan and calls to revise the pacifist constitution, is expected to heighten geopolitical friction with China and may prompt a re-evaluation of U.S. trade agreements.
TOKYO, Oct 4 (Reuters) - Sanae Takaichi came out top in a male-dominated race to lead Japan's ruling party on Saturday, putting her on course to emulate her hero, former British leader Margaret Thatcher, and become her country's first female prime minister. The fiscal dove's surprise victory may jolt investor confidence in one of the world's most indebted economies, while her nationalistic positions could stoke friction with powerful neighbour China, political analysts say. The Reuters Daily Briefing newsletter provides all the news you need to start your day. Sign up here. Advertisement · Scroll to continue She has also raised the possibility of redoing an investment deal with the U.S. that reduced President Donald Trump's punishing tariffs on Japanese goods. NOISEMAKER WITH NATIONALIST BENT Having lost a run-off against Shigeru Ishiba to lead the Liberal Democratic Party last year, Takaichi, 64, will now seek approval from parliament to replace him as prime minister. That is expected as the LDP is the largest party in parliament but it is not assured, as the ruling coalition no longer has a majority in either house after losses in elections over the last year under Ishiba. Hosting Trump in Japan later this month is expected to be one of Takaichi's first acts as leader. Advertisement · Scroll to continue "Rather than being happy, I feel like the tough work starts here," Takaichi said in a speech to her fellow LDP lawmakers after her victory. A former economic security and interior minister, Takaichi has repeatedly referred to Thatcher as a source of inspiration, citing her strong character and convictions coupled with her "womanly warmth". She said she met the conservative Thatcher, a divisive figure in British politics known as "the Iron Lady", at a symposium shortly before Thatcher's death in 2013. A drummer and a fan of heavy metal, Takaichi is no stranger to creating noise herself. She is a regular visitor to the Yasukuni shrine, which honours Japan's war dead - including some executed war criminals - and is viewed by some Asian neighbours as a symbol of its past militarism. Takaichi favours revising Japan's pacifist postwar constitution to recognise the role of its expanding military. She suggested this year that Japan could form a "quasi-security alliance" with Taiwan, the democratically governed island claimed by China. 'ABENOMICS' ADVOCATE MAY CAUSE SHOCKWAVES Although Takaichi has pledged to increase the number of female cabinet ministers, an area where Japan has lagged its G7 peers, polls show her conservative positions chime more with men than women. She opposes same-sex marriage and allowing married couples to have separate surnames, an issue that has broad public support in Japan but faces staunch opposition within conservative circles. But it is her economic policies that might create the biggest shockwaves. A protege of the late Shinzo Abe and long-time advocate of the former prime minister's "Abenomics" stimulus policies, Takaichi has called for higher spending and tax cuts to cushion rising cost of living and has criticised the Bank of Japan's decision to raise interest rates. Takaichi's mother was a police officer in her native Nara in western Japan and her father worked in Japan's critical automotive industry. In a key speech last month, she complained about tourists kicking sacred deer that roam Nara Park, pledging a crackdown on badly behaved foreigners - an issue that has become a lightning rod for some voters amid record rises in migrants and tourists. Takaichi graduated from Kobe University with a degree in business management before working as a congressional fellow in the U.S. Congress, according to her website. She broke into Japanese politics winning a lower house seat in 1993 as an independent, before joining the LDP in 1996. Reporting by John Geddie; Editing by William Mallard Our Standards: The Thomson Reuters Trust Principles. Sanae Takaichi's surprise victory in Japan's LDP leadership race introduces significant policy and market uncertainty, flagged by a moderately negative sentiment score and high market impact. Her economic platform, rooted in a continuation of "Abenomics," advocates for expansionary fiscal policy through higher spending and tax cuts, directly challenging the Bank of Japan's recent move to raise interest rates. This divergence signals a potential conflict between the government and the central bank, which could "jolt investor confidence" and create volatility in JGB and currency markets. Geopolitically, Takaichi's nationalistic stance is expected to increase friction with China, evidenced by her proposal for a "quasi-security alliance" with Taiwan and support for revising Japan's pacifist constitution. This escalates regional risk for investors. Furthermore, her suggestion efeitos of redoing a U.S. investment deal introduces trade policy uncertainty. Compounding these risks is the domestic political situation, as the LDP's lack of a majority in both houses of parliament means her confirmation as Prime Minister is "not assured," creating a backdrop of potential instability.
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