Japan Set For First Female Prime Minister After Takaichi Wins LDP Race

Sanae Takaichi is on track to become Japan's first female prime minister, after the ruling party elected her as its leader Saturday.

Takaichi will face the task of trying to reunite the ruling Liberal Democratic Party, regain public support and reengage with a younger generation of voters who are flocking to smaller populist parties amid a cost-of-living crunch and an influx of foreigners. 

Given the once-dominant party's loss of its majorities in both chambers of the legislature, the new leader will also need to reach out to some of the opposition parties to pass legislation and budgets. While she's expected to break Japan's highest glass ceiling, she's generally touted conservative values and it's unclear whether she'll bring about progress on women's issues.

Shortly after being elected LDP leader, Takaichi took to the stage to address her fellow party lawmakers with a message that they will have to roll up their sleeves and get to work.

“Rather than feeling happy right now, I am thinking about the hardships that are yet to come. There is a mountain of things that we must accomplish together,” she said. “I would like to see you work like horses. I'm going to abandon the phrase ‘work-life balance,'” she said, prompting laughter from the rows of LDP lawmakers listening to her speech.

Five contenders competed for ballots in the first round of voting. In the run-off between the top two candidates, Takaichi secured 185 votes in total against political scion Shinjiro Koizumi's 156. More votes also went to Takaichi than Koizumi in the first round, particularly among the party's around 916,000 rank-and-file party members.

Takaichi will face a parliamentary vote later this month to become premier, a contest expected to go to the LDP chief given the fragmentation among the opposition parties. A victory in that vote by Takaichi would mark the emergence of Japan's first female premier.

For a country that has seen limited progress on gender equality, especially in politics, that could represent a watershed moment. Japan ranks 118th out of 148 countries in the World Economic Forum's Gender Gap Index, trailing behind nations such as Senegal and Angola. 

Meanwhile the former economic security minister is likely to face a key diplomatic test less than a month into the job. President Donald Trump is expected to pass through Asia in the coming weeks and could meet the new Japanese leader in Japan or on the sidelines of multilateral meetings in the region depending on schedules and attendance.

Japan has largely wrapped up its trade deal with the United States and has secured the lowering of auto tariffs to 15%. But the implementation of a $550 billion investment fund in the US could still cause issues, while Washington's demands on defense spending by its allies may also become a talking point.

What Bloomberg Economics Says...

“The victory of pro-stimulus Sanae Takaichi in the leadership race of the Liberal Democratic Party is set to tilt Japan's fiscal policy in a more stimulative direction. For the Bank of Japan, it could also mean a slightly slower pace of rate hikes. Takaichi's strong performance on Saturday was likely a surprise and could fuel risk-on sentiment in Japanese markets next week.”

— Taro Kimura, economist

Takaichi is known to be fiscally expansionist and politically right-wing. Known to be a protege of the late prime minister Shinzo Abe, she's also prompted views that her taking the LDP's helm will move the country backward toward Abenomics. She's also known for citing former UK Prime Minister Margaret Thatcher as an inspiration.

Her pro-stimulus stance may have an impact on markets.

Takaichi says she will ensure her active fiscal policy is “responsible” as she looks to boost growth. She has also called for monetary policy to stay easy, saying that the Bank of Japan shouldn't raise borrowing costs, Kyodo News reported Thursday, citing a survey. Those views may help weaken the yen and boost stocks while pushing up super-long government debt yields.

In a move that would likely anger China, Takaichi has also said she hopes to continue visiting Yasukuni shrine in Tokyo. The shrine is seen as symbolizing Japan's past militarism. 

Takaichi is expected to hold a press conference later Saturday.