Take Takaichi Fiscal Policy Seriously: The Lady's Not For Turning

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What is also clear – and regarding this there are signs at her website, dating back at least twenty years, of her wanting greater national investment in self-reliance and resilience – is that her industrial policy priorities were in virtually the same form in 2021 that they are in 2026.

Her 2021 book walks through many of the same sectors – AI, semiconductors, next-generation sustainable energy sources, robotics, quantum computing, supply chain resilience and cybersecurity – that are included in the“priority sectors” under consideration as part of the Takaichi government's growth strategy this year.

The fact that her conduct as prime minister is proceeding exactly as she outlined nearly five years ago suggests a fundamental political commitment to this vision of using government financial resources to strengthen Japan. She did not embrace“responsible fiscal expansion” because she was pressured by opposition parties or felt compelled to do so in order to win a legislative majority.

Indeed, her commitment to fiscal expansionism is bolstered by the LDP right's commitment to fiscal expansion. She is by no means alone in believing that strengthening Japan requires more spending. I have previously written at length on how the LDP's right wing“learned to love deficits.”

Effectively, in the years since the end of the second Abe administration in 2020, the LDP's conservatives have become increasingly prepared to argue that Japan's fiscal situation is not as dire as it appears, that national priorities (especially defense) require a tolerance for more deficit spending and that MOF is effectively“public enemy number one” standing in the way of a stronger Japan.

The LDP right's embrace of fiscal expansion may be traced at least as far back as the end of the Koizumi government. The“Koizumi coalition” at that time split between, on the one hand, proponents of fiscal orthodoxy – who wanted a primary surplus as soon as possible and favored a consumption tax hike – and, on the other hand, the “rising tide” school led by Hidenao Nakagawa, which argued that Japan could achieve fiscal sustainability by prioritizing growth that would raise tax revenues automatically.

Nakagawa, the LDP's secretary-general when Abe became prime minister in 2006, was also the first to use the phrase“Abenomics.”

These debates continued to divide the LDP through the start of the second Abe administration. The turning point may have been Abe's decision to raise the consumption tax from 5% to 8% in 2014, after he was assured by MOF and other authorities that the economy could withstand the impact of a tax hike.

When the hike triggered a recession instead, Abe's distrust of MOF and its approach to fiscal policy would grow, which among other things led him to delay the second consumption tax twice before finally agreeing to implement it. While Abe was still prime minister, conservative backbenchers were increasingly willing to question the“MOF view.”

For example, in April 2017, LDP lawmaker Hiroshi Ando – now a Sanseito upper house lawmaker – formed the Study Group for Japan's Future. That grouop in meetings with reflationist and heterodox economic thinkers articulated a program for rescinding the longstanding primary surplus target, cutting the consumption tax, and expanding deficit spending to pay for social security and other priorities.

That study group joined forces with the Conference to Protect Japan's Dignity and National Interests – a conservative parliamentarians' league to which Takaichi belonged – to call for a consumption tax cut in 2020 in response to the Covid-19 shock.

The Study Group for Japan's Future dissolved in 2021, but its members – and its ideas – would subsequently be taken up by the Parliamentarians' League for Responsible Fiscal Expansion, a group of more than 100 younger LDP members that formed in February 2022. The speakers at its first meeting were Abe and his reflationist adviser Etsuro Honda.

The cause would also be taken up by the Fiscal Policy Review Headquarters, a group established in 2021 by then-LDP policy chief Takaichi as a counterweight to the LDP's Fiscal Consolidation Headquarters.

With Abe serving as a senior adviser, it was headed by upper house lawmaker Shoji Nishida, a Takaichi ally who is the LDP's most prominent advocate of Modern Monetary Theory. (He lists MMT as one of his interests on his LDP bio.) Nishida argued that the Fiscal Consolidation Headquarters was dominated by fiscal hawks who were“MOF mouthpieces.”

This group gave the conservative fiscal doves a formal institutional base within the LDP, from which they pressured the Kishida government.

For example, in 2024, they delivered a series of proposals to then-Prime Minister Kishida that are a useful map to the principles guiding the LDP's fiscal expansionists, principles that can be seen in the Takaichi government's program.

This document calls for scrapping the primary fiscal surplus target and relaxing restrictions on bond issuance. It downplays the significance of gross debt issuance due to the BOJ's bondholding.

It identifies excess saving by the private sector as the most significant problem facing Japan's economy. To rectify this problem, the conservative doves argue:“Until private investment is activated, the government should expand demand for funds through proactive fiscal management, creating demand that exceeds aggregate supply (high pressure economy), thereby eliminating the private sector savings glut.”

Among the group delivering these proposals to Kishida were Nishida, current Finance Minister Katayama Satsuki and current Economic Revitalization Minister Kiuchi Minoru.

As this roster suggests, personnel matters as much as principles. It is not only that Takaichi herself has expressed these beliefs.

She is surrounded by veterans of groups that have advocated for a dramatic shift on fiscal policy, including Katayama; Kiuchi, who belonged to the Study Group for Japan's Future and the Fiscal Policy Review Headquarters, and served as a senior adviser to the Parliamentarians' League for Responsible Fiscal Expansion; and Hiroyuki Nakamura, presently vice minister of education, who belonged to the Study Group for Japan's Future and was the leader of the Parliamentarians' League for Responsible Fiscal Expansion.

Nakamura was also one of Takaichi's twenty endorsers in 2024 and 2025. Another associate, Masaaki Akaike, is a former upper house lawmaker who still leads the Conservative Unity Association, a group that has named Abe its“eternal adviser,” had Takaichi as an adviser and served as the nucleus for her leadership bids.

Akaike recently shared a photo of Takaichi meeting with the association in December, and, in a blog post written at the start of the general election campaign, described the“true purpose” of the general election as a“#DismantleMOF election.”

The final piece of the puzzle is Abe's personal conversion on fiscal policy in the years between his resignation and his assassination. After leaving office, Abe reemerged as the LDP's“conservative-in-chief,” publicly articulating the direction for Japanese conservatism and supporting LDP groups working towards this end.

During this stage of his career, Abe shifted in a more radical direction on fiscal policy. In a speech in December 2021, he attacked a controversial essay by MOF Administrative Vice Minister Koji Yano published in the Bungei Shunju in October 2021 – during that month's general campaign – that blamed politicians for wasteful spending and warned that Japan was a Titanic headed for a fiscal iceberg.

In response, Abe argued,“If Japan were the Titanic, there would be no people buying bonds issued by the Titanic.”

Instead, Japan's debt, which surged during the pandemic as the government used deficit spending to finance emergency stimulus, is fine because the BOJ – a“national subsidiary” in his words – holds a majority of the outstanding debt, meaning the government owes money to itself.

Abe's feelings about MOF would become more apparent after his assassination, when the posthumous publication of his memoirs revealed the extent of his hostility to the ministry, essentially serving as a warning to his followers – including Takaichi, his successor – that the ministry and its allies within the LDP should be treated as hostile. For example, he said in his memoirs,“The power of MOF, which controls budgeting, is strong. They will overthrow an administration that does not follow their will unhesitatingly.”

The reverence with which Abe is treated by the LDP's right may only serve to reinforce members' commitment to fiscal dovishness and their view that MOF is the greatest obstacle to their achieving their vision for Japan's future. As two journalists with the conservative Sankei Shimbun phrased it in a book on Abe's adversarial relationship with MOF, the ministry's commitment to a balanced budget – as mandated in Article IV of the Public Finance Law – is part of the“postwar regime” restricting Japan's national power that Abe wanted to dismantle. They write:

This is all to show that Takaichi's embrace of fiscal expansionism is by no means opportunistic or a response to temporary conditions. Rather, it is a fundamental part of the ideological tradition from whence she emerged and the political milieu in which she still moves.

This cohort is gleeful with the outcome of the election, believing that Takaichi has not won just a mandate for more spending but a mandate for a more fundamental national renovation that removes MOF as an obstacle to more spending on a program of national self-strengthening.

As this last point suggests, the Japanese public appears to be broadly supportive of Takaichi's“responsible fiscal expansionism” and hostility to MOF.

There are both narrow and broad ways of thinking about the public's attitudes towards Takaichi's fiscal policy approach.

Narrowly, Takaichi's rise and the broader institutionalization of fiscal expansionism within the LDP right have coincided with the emergence of a popular movement against MOF that has culminated in regular protests outside the ministry headquarters and across the country in which the protesters have called for the ministry to be dismantled.

These demonstrations, which have been attended by thousands at a time, have been matched by hashtag campaigns that have generated significant web traffic.

There is some connectivity with elite opinion. Right-wing columnist and onetime Abe adviser Yoichi Takahashi published a book called Zaimusho Kaitai (財務省解体), which serves as the main anti-MOF hashtag, in 2018.