Can Sanae Takaichi Revive Japan's Stagnant Economy?

As Japan's first female prime minister, Sanae Takaichi has a daunting task ahead of her: reigniting the world's third-largest economy after years of sluggish growth. With her conservative, pro-business platform, Takaichi is promising a radical shift in economic policy - but can she deliver where her predecessors have failed?

Reviving the 'Lost Decades'

Japan's economy has been stuck in the doldrums for over 30 years, a period dubbed the "lost decades" marked by stagnant wages, deflationary pressures, and a rapidly aging population. Takaichi, a protégé of former PM Shinzo Abe, aims to breathe new life into the economy with a return to the Abenomics playbook of massive fiscal stimulus, ultra-loose monetary policy, and structural reforms.

As Reuters reports, Takaichi plans to double down on government spending to spur investment, boost productivity, and drive technological innovation. This includes funneling trillions of yen into areas like defense, infrastructure, and green energy - a strategy she believes will create jobs and give Japan an edge in the global tech race.

Risks of "Sanaenomics"

However, Takaichi's economic vision is not without its critics. Nikkei Asia reports that her plan to keep interest rates low and the yen weak could exacerbate Japan's already high inflation, currently running over 3%. This could further erode consumers' purchasing power and undermine the very growth she aims to spur.

Moreover, Japan's public debt is already over 260% of GDP, one of the highest ratios in the world. Piling on more debt through reckless spending could backfire, rattling bond markets and limiting the government's fiscal flexibility down the line.

The bigger picture here is that Takaichi faces a delicate balancing act. As Anadolu Agency notes, she must find a way to boost growth and competitiveness without igniting a full-blown debt crisis. Failure to do so could further damage Japan's economic standing and undermine Takaichi's political legacy.

Ultimately, the success or failure of "Sanaenomics" will hinge on Takaichi's ability to thread this needle. The stakes could not be higher for the new prime minister - and for the world's third-largest economy.