Has Sanae Takaichi Made Japan Great Again?

SPEAKER_1 (0:02)

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Paul Jackson (0:09)

I think Sanae Takaichi is one of the strongest, most charismatic leaders we've seen in post-war Japan.

K. Oanh Ha (0:17)

Paul Jackson covers Japan's economy and government for Bloomberg in Tokyo.

I sat down with him to discuss a major milestone for Japan. This week marks one year since Sanae Takaichi made history as the country's first female prime minister. In your view, what's been the defining feature of her tenure?

Paul Jackson (0:37)

I think she's marked a move towards a more forthright, confident and conservative leadership that speaks to a Japan that stands up for itself. She's got a style that's based on a very direct, a responsive relationship with voters, rather than a style that depends on consensus built within party politics.

K. Oanh Ha (1:03)

And she's thinking big. Paul says Takaichi has made it clear she wants to build a stronger Japan through eye-popping investments in key industries like AI, shipbuilding and aerospace.

Paul Jackson (1:15)

What Takaichi is saying is we need to put public money into these industries to make sure we're front of the pack. She sees Japan as still lacking in dynamism compared to how Japan was back in the 80s, when at one point some economists thought it would even overtake the United States to become the largest economy in the world.

K. Oanh Ha (1:37)

It's an ambitious bet that's had global markets and the Bank of Japan on edge. And Paul says her ability to pull it off has massive implications for Japan's financial future.

Paul Jackson (1:49)

She's looking for a huge increase in domestic investment, and she's set this target of reaching 370 trillion Yens worth of investment within 14 years. The problem is Japan can't afford to pay 370 trillion Yen, but at the same time, it's going to have to put 20 or 30 percent of the money down in order to get the private sector to start investing too.

K. Oanh Ha (2:19)

This is the Big Take Asia from Bloomberg News. I'm Oanh Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today in the show, one year of Prime Minister Sanae Takaichi. We look at whether she's delivered on her promises of a stronger Japan and how her policies could shake up the global economy.

Take us back to October of last year when Takaichi came into office.

What was the economy that she inherited back then? And what does her economic scorecard look like now a year later?

Paul Jackson (2:58)

Well, the economy was growing reasonably sluggishly with weak prices and deflation for decades and very kind of limp growth. I would say that in terms of economic growth, there has been no major change under her leadership. She's still got a lot to prove on that score. In terms of inflation, she came in, inflation is around about 3% and currently we're at about 2%, although that is going to creep up over the coming months. So that's been good for voters, but at the same time, they're still getting used to this idea of prices going up, which is something that they haven't been used to for a couple of generations.

K. Oanh Ha (3:45)

Would you say that inflation has been the hallmark of her economic agenda?

Paul Jackson (3:49)

Inflation is a key element of her economic agenda.

Since the early 90s, one of the key objectives of Japanese policy has been to rekindle inflation. It's a very strange concept for countries elsewhere in the world, where you wanted to try and control it and keep it down. But in Japan, the implosion of the economy after the asset bubble burst in the early 90s meant that the economy was in kind of stasis, a lack of growth, a lack of movement in prices, a lack of movement in wages. So bringing back inflation has long been seen as the key cure for getting Japan moving again and to a larger extent, that has now been achieved.

K. Oanh Ha (4:38)

Now, Takaichi was a protege of Shinzo Abe, Japan's longest serving prime minister, whose signature economic program, Abenomics, pulled the country out of decades of economic stagnation. To what degree has she embraced Abenomics?

Paul Jackson (4:54)

Takaichi is definitely an heir to the Abenomics ideas about how to restore growth and dynamism in Japan's economy. I would say that in one key respect, she has moved on from the Abenomics model. She used to say that raising interest rates was dumb.

And while she's been leader in Japan, interest rates have more than doubled.