Japan PM Takaichi’s Landslide Election Win Points to Looser Fiscal Policy in World Economy News 11/02/2026 Prime Minister Sanae Takaichi’s emphatic win in Japan’s election points to more expansionary fiscal settings over the coming years, Fitch Ratings says. We had already assumed post-election fiscal easing and widening deficits in our January 2026 affirmation of Japan’s sovereign rating (A/Stable). For now, we believe this baseline remains intact; however, risks remain that fiscal stimulus measures under Prime Minister Takaichi could prove larger than our baseline, adding pressure to the fiscal trajectory and, over time, the credit profile. Prime Minister Takaichi’s Liberal Democratic Party (LDP) secured 316 Lower House seats, up from 198, gaining a two-thirds supermajority. The LDP and its coalition partner, the Japan Innovation Party (JIP), now hold 352 seats, up from 230 prior to the snap election. Takaichi called the election in January after taking office only in October in order to capitalise on her popularity and seek a mandate on her policy agenda. Her campaign focused on providing cost-of-living support to households and boosting economic growth, along with a tougher stance on immigration and national security issues. Japan’s fiscal stance could loosen further because the LDP’s supermajority will enable the new government to implement policies with few obstacles. In particular, the two-thirds majority will enable the LDP to override Upper House vetoes where its coalition is in the minority. Our fiscal deficit forecast widens from 1.4% of GDP in FY24 to 2.4% in FY25 (year ending March 2026) and rises towards 3.7% by FY27. A larger fiscal package would be the main channel for deficits to overshoot our forecasts. Takaichi campaigned on “responsible and proactive fiscal policies”. Policy choices under the new government are likely to focus on tax relief and growth-oriented investment spending, reflecting voter concerns over higher inflation and low income growth. Takaichi has stated that she plans to advance her campaign promise of a two-year suspension of the consumption tax on food – costing about 0.7% of GDP per year. Higher investment in key hi-tech sectors to lift potential economic growth is also likely to be a key element of the LDP’s fiscal agenda. While the LDP’s two-thirds supermajority should enable it to enact its fiscal agenda quickly, it will also be less beholden to demands from its JIP coalition partner and other parties. This could help to limit some fiscal risks, as the LDP will not have to accede to fiscal demands of other parties. The degree of fiscal expansion therefore remains uncertain. Our forecasts will evolve as the new government sets out more detail on its fiscal and economic agenda in the coming months. Market reactions to policy plans could moderate the extent of fiscal expansion. Takaichi’s plans could be tempered by risks of higher government bond yields – which are rising amid entrenched inflation and higher policy rates – because they increase the political and fiscal cost of debt-financed stimulus and could limit the size or duration of new measures. Even with our wider deficits forecasts, Japan’s debt dynamics should remain supported by nominal GDP growth, reducing risks to the sovereign rating in the near term. Japan’s fiscal position has improved materially in the past several years, with narrowing fiscal deficits and higher nominal GDP growth reducing government debt to a forecast of just un