Japan has given Takaichi a landslide win – but can she bring back the economy? in World Economy News 11/02/2026 Japan’s prime minister, Sanae Takaichi, rolled the dice on a snap election – and it paid off. She and her Liberal Democratic Party (LDP) have the kind of decisive majority – 316 out of 465 seats – that few leaders have enjoyed recently. Rather, Japan has had a revolving door of prime ministers. Now the question is what Takaichi does with it. Can she deliver what has eluded the Japanese economy for decades: faster growth? Japan has a long list of problems: sluggish growth, public debt that is the largest in the world, and a working population that is both ageing and shrinking. Takaichi, some observers believe, has the chance to change this, reshaping how Japan runs what is the world’s fourth-largest economy – and how the markets see it. She will steer Japan in the right direction, says Tomohiko Taniguchi, a policy adviser and former speechwriter for late prime minister Shinzo Abe. “If successful, it will serve as a premier case study for ageing societies worldwide.” Where will the money come from? Takaichi had campaigned on the promise that she will spend more, including investment in key industries, to boost growth. This was a pivot from her predecessors. She vowed to cut taxes so people can spend more, and said growth rather than savings was the priority. But markets were rattled with doubt over how she would fund these plans. Her overwhelming majority seems to have assured investors – and it showed in the positive market reaction to her Sunday night win. Investors have been placing what they call the “Takaichi trade”, buying Japanese shares while selling the yen and government debt. Crucially, the yen has also gone up in value – for some investors, a stronger currency is a good thing. But it’s more complicated than that. When Takaichi came into office in October, government bond yields – effectively the interest Japan pays to borrow money – jumped. That’s a major concern for investors because of Japan’s steep public debt. More spending and lower taxes – which Takaichi has been promising – means the government needs to borrow more money. Japan’s bond market is one of the largest in the world, so even small changes in Tokyo can ripple across global markets, affecting borrowing costs, investment decisions, and currencies. Investors are also watching interest rates because the Bank of Japan is trying to move away from decades of ultra-low rates to control inflation. The cost of rice, for example, doubled in 2025. Rising prices are a shock for a country that has become accustomed to stable or falling prices. This was central to the message that powered Takaichi’s rise: voters feel poorer and prices feel higher. After all, it was one of the issues that cost her predecessor his job. Takaichi’s proposed tax cuts may ease the pain for households in the short term. But Keiichiro Kobayashi, professor of economics at Keio University, warns that this is a dangerous path: “An increase in spending would just stimulate inflation and increase the cost of living.” Instead, he says, the government should allow the Bank of Japan to continue raising interest rates to fight inflation, while tightening government spending, which would also satisfy investors. Because Japan is less attractive to foreign investors when interest rates are low and government spending is high, that reduces demand for the currency and weakens it. A weaker yen pushes up t