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last mo.

Takaichi Vows Tougher China Stance, Speeds Budget Push as She Defends Tax Cut Plan

Market skepticism persists over the sustainability of her proposed tax holiday, with the IMF warning of higher debt costs.

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Overview

  • Sanae Takaichi used a policy speech to condemn Chinese coercion, signal revisions this year to Japan’s core defense documents, and call for looser rules on lethal arms exports.
  • Parliament reconfirmed her on Feb. 18 after the LDP’s two‑thirds win, she kept her cabinet in place, and her bloc expanded through a coalition with the Japan Innovation Party.
  • Her government is racing to pass the ¥122.3 trillion fiscal‑2026 budget before April 1, with new bond issuance of about ¥29.6 trillion and the possibility of a provisional budget if deliberations slip.
  • She pledged a two‑year suspension of the food consumption tax and vowed no reckless fiscal policy, even as the IMF cautioned that debt‑service costs could roughly double between 2025 and 2031.
  • Takaichi highlighted deeper alignment with the United States by unveiling an initial slate of projects under a promised US$550 billion Japanese investment commitment tied to a bilateral economic deal.