Takaichi Delivers Policy Speech

Prime Minister Sanae Takaichi made her first policy speech in the extraordinary Diet session on October 24. In her speech, Takaichi insisted on “responsible and active fiscal policy” to deal with investment for crisis management. She also expressed her willingness to increase defense budget without showing fiscal resource for it. However, she refrained from referring to enhancing confidence on management of political funds. Takaichi will only be responsible for her own agenda. 

“To achieve ‘strong economy,’ we will make a strategic spendings under the concept of ‘responsible and active fiscal policy,’” stressed Takaichi in her speech. She explained that her policy would improve people’s mind for consumption, boost corporate profit and increase fiscal revenue without raising tax rates. Although she argued that the rate of governmental debt increase would be less than rate of economic growth and her government would achieve sustainability, she did not elaborate how her policies would be strategic.

 

Her priority was on overcoming price inflation. Takaichi promised that she would pass a bill for abolishing temporary gasoline tax rate introduced in 1974 in current session of the Diet. However, she did not say when the tax would be abolished. It is possible that the bill will pass in the current session of the Diet, but the tax rate will be removed next year or later. The Liberal Democratic Party considers elimination of the tax rate in February 2026 and introduce new subsidy to lower the gasoline price by February. Takaichi said in her speech that she would bring down gasoline price with subsidy, until she finds fiscal resource for that policy.

 

Takaichi upholds crisis management investment, which meant a strategic investment including economic security, food security, energy security, health and medical security or reinforcement of homeland. She will establish “Japan Growth Strategy Conference” for the investment. Growth strategy was one of the three pillars of Abenomics, paralleled with fiscal spendings and monetary policy. However, relationship between risk management and economic growth is still unclear.

 

Takaichi’s positive attitude for increasing defense budget seems to be an appeasement to the pressure from U.S. Donald Trump administration on its allies to increase spendings for defense. Her government will achieve 2 percent defense spendings against Japan’s GDP within FY 2025. When former prime minister Fumio Kishida set the 2 percent target, he assumed that he would secure the budget for it by increasing income tax, corporate tax and tobacco tax. Takaichi has not shown the fiscal resource for the defense spendings.

 

To implement coalition agreement with Japan Innovation Party (JIP), Takaichi included reduction of Diet seats, which JIP insisted, in her policy speech. Instead, she did not spoke about reform of management of political fund, including donation from companies and organizations. It seemed to be a tactic to shift focus from political donations to cut in seats of the legislative branch, asserting it as a reform with sacrifice. However, the opposition parties are against the reduction of Diet seats, because the idea would be reduction in proportional district which would damage small opposition parties.