TOKYO, JAPAN – OCTOBER 4: Sanae Takaichi, the newly-elected leader of Japan’s ruling party, the Liberal Democratic Party (LDP), poses for a photo in the party leader’s office after the LDP presidential election on October 4, 2025 in Tokyo, Japan.
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Sanae Takaichi on Tuesday created history, winning Japan’s parliamentary vote to become the country’s first women prime minister, with domestic stock markets cheering her ascendancy.
Takaichi garnered 237 votes in the first round of voting, negating the need for a runoff vote in the 465-seat Lower House, according to public broadcaster NHK.
Her victory comes after the ruling Liberal Democratic Party allied with the Japan Innovation Party and reportedly signed an agreement over the weekend to form a coalition government.
Takaichi agreed to back JIP policies such as a reduction in parliamentary seats, free high school education and a two-year pause on food consumption tax, according to Reuters.
Tobias Harris, founder and principal at risk advisory firm Japan Foresight, told CNBC’s “Squawk Box Asia” that the JIP might not want to take up a cabinet post, saying that “there’s a real risk joining a coalition with an LDP that is still seeing historically low approval ratings, [and] does not really have the trust of the public.”
Domestic Japanese media has also reported that the JIP is not looking at cabinet positions in the new administration, and will instead support the government from the outside.
Should the JIP not like the LDP’s approach, it will be easier for them to exit the coalition, Harris said.
In the Ishiba administration, the LDP suffered heavy electoral losses, losing its majority in both the upper and lower house.
Japan’s stock market has cheered Takaichi taking the reins of the government, with the Nikkei 225 hitting a fresh high on Tuesday, following a record session on Monday, in what experts have called the “Takaichi trade,” pricing in the prospects of a looser monetary policy and larger fiscal stimulus.
Japan’s benchmark 10-year government bond yields dipped marginally to 1.665%. The yen was down 0.15% at 150.96.
Path to PM
Takaichi’s path to the country’s top job has been challenging.
In the 2024 LDP presidential race, Takaichi lost to Shigeru Ishiba. She won the leadership of the party in September this year, defeating Agriculture Minister Shinjiro Koizumi after Ishiba announced his resignation.
But on Oct. 10, the Komeito party abruptly exited its alliance with the LDP, ending a relationship going back to 1999, putting Takaichi’s fate in a limbo.
A hardline conservative, Takaichi has been widely labeled as an apostle of “Abenomics,” the economic strategy of the late Prime Minister Shinzo Abe, which espoused loose monetary policy, fiscal spending and structural reforms.
She had previously criticized the Bank of Japan’s plan to raise interest rates during the 2024 LDP leadership race, although BOJ Governor Kazuo Ueda has said that the central bank would set rates “without any preconceptions.”
On the geopolitical front, Takaichi has called for a hardline stance toward China and is also in favor of revising Japan’s pacifist constitution.
Her previous visits to the controversial Yasukuni Shrine, which honors Japan’s war dead, including convicted war criminals, have drawn criticism from China and South Korea, which see the site as a symbol of Tokyo’s wartime aggression.
Takaichi is going to be “very, very careful” in how she communicates her views, especially on foreign policy,” said Kei Okamura, managing director and portfolio manager of Neuberger Berman, told CNBC earlier this month.
“Her views on China and Korea have also been very well flagged. But she also understands that she has to maintain very good relations with all these countries, especially also with the United States, just because all of them have a very big impact in terms of Japan’s biggest export destinations.”