Speaker 1: Bloomberg Audio Studios, podcasts, radio news. The nie Ki, of course,
Speaker 1: already at a record high after that historic landslide victory
Speaker 1: by Prime Minister Takaichi and her party.
Speaker 2: Japanese stocks are on a tear this week.
Speaker 3: As has welcome the resounding election win for promiss Sanai Takaichi,
Speaker 3: the LdB winning a standalone super majority, positioning her.
Speaker 1: Japanese equities had searched like fresh record highs on Monday.
Speaker 1: Semiconductor stocks are doing really well. Defense related stocks are
Speaker 1: doing really well.
Speaker 2: Sakura Murakami covers Japanese politics for Bloomberg out of Tokyo.
Speaker 2: She says the country stocks have gotten a big lift
Speaker 2: from Japanese Prime Minister Sanai Takeiichi's historic election win this
Speaker 2: past weekend.
Speaker 1: I'm not sure anyone was really expecting this level of
Speaker 1: a landslide. Three hundred and sixteen seats gained only by
Speaker 1: the Liberal Democratic Party. That's the most seats ever for
Speaker 1: the LDP since is founding in nineteen six.
Speaker 2: And that landslide victory came after Takichi made a big gamble.
Speaker 2: She came into power four months ago with the razor
Speaker 2: thin majority in parliament, but she wanted a mandate for
Speaker 2: a combination of conservative social policies and populist big spending pledges.
Speaker 2: So she called a snap election.
Speaker 1: I think everyone was expecting the LDP and Takeichi to win,
Speaker 1: but not to this extent.
Speaker 2: Takeiichi's win gives her ruling party an outright majority in
Speaker 2: Japan's lower house.
Speaker 1: She'll be able to kind of push through a lot
Speaker 1: of the policies that she wants to do. She's pushed
Speaker 1: forward this idea of Japan being strong and assertive on
Speaker 1: the global scene, whether that's economically or militarily or diplomatically.
Speaker 2: It's a historic win. But while she has the pace
Speaker 2: people behind her, the bond market remains skeptical of her
Speaker 2: plans for the economy.
Speaker 1: The single biggest challenge that Takaichi faces now is delivering
Speaker 1: on her campaign promises. That's crucial both for markets and
Speaker 1: in terms of regaining investors' trust, and also politically. You know,
Speaker 1: if she's seen as weak or enabled to deliver on
Speaker 1: her promises, that's going to undermine her political strength as well.
Speaker 1: So it all comes down to the execution.
Speaker 2: This is the big take Asia from Bloomberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons, and
Speaker 2: businesses that drive this ever shifting region. Today, on the
Speaker 2: show Unpacking Sinai Takeiichi's landslide victory, what her vision for
Speaker 2: a more assertive free spending drip looks like, and can
Speaker 2: she sell anxious global investors on her bold but risky
Speaker 2: economic plans. When Sinnai Takeiichi called a nap election last month,
Speaker 2: she was governing from a very shaky position. Her Liberal
Speaker 2: Democratic Party combined with its junior coalition partner, we're struggling
Speaker 2: to get by with a slim majority in parliament.
Speaker 1: That means she had to do a lot of haggling,
Speaker 1: a lot of negotiating, a lot of discussing with smaller
Speaker 1: parties that had leverage over her because she didn't have
Speaker 1: a majority. She did have this razor thin majority in
Speaker 1: the lower House, which is more powerful, but it was
Speaker 1: two hundred and thirty three seats out of four hundred
Speaker 1: and sixty five. If one person couldn't make it to vote,
Speaker 1: she would have lost the majority. So that was how
Speaker 1: close she was. And to consolidate her power to really
Speaker 1: push through the policies that she wanted to see implement
Speaker 1: that was a gambit that's obviously paid off.
Speaker 2: Now Takeichi's viewed generally as a right wing conservative, but
Speaker 2: obviously the election results show that she has such massive,
Speaker 2: widespread public support. What's behind her broad appeal.
Speaker 1: When I was at her rally, I noticed that she
Speaker 1: would go into her politicies, and the crowd responded the
Speaker 1: most when she talked about a strong independent Japan, and
Speaker 1: that wasn't strong and independent in terms of just the
Speaker 1: military and defense, but in terms of the economy. So
Speaker 1: when she talked about rare earth and not being so
Speaker 1: reliant on certain countries for rare earth supplies, she got
Speaker 1: like big cheers basically. So I think that goes to
Speaker 1: show that people have been concerned about the economy and
Speaker 1: they see the strength that she's portraying and that she's
Speaker 1: trying to present to the public as a way forward,
Speaker 1: something they can be hopeful about for the future.
Speaker 2: And she's hugely charismatic, especially with her personal story, right.
Speaker 1: She's got a great personal story. She rides motorbikes, heavy
Speaker 1: metal drummer. She's a drummer. When she was in university,
Speaker 1: you know, she would rock up to her classes with
Speaker 1: pink hair. She had long hair had pink streaks in them.
Speaker 1: She's such a character and you can see that in
Speaker 1: the way that she presents herself on social media as well.
Speaker 1: So one of the moments that went viral for her
Speaker 1: was this big hug that she gave Italian Prime Minister
Speaker 1: Georgia Maloney at the g twenty last year. It was
Speaker 1: the first time that they met, but their eyes locked
Speaker 1: across the room and they just like jumped into this
Speaker 1: huge embrace, which kind of went viral. And it's very
Speaker 1: unusual for a Japanese leader, I think, to have that
Speaker 1: level of closeness immediately and immediate rapport with a foreign leader.
Speaker 2: Now, Taki she styles herself as a conservative, but some
Speaker 2: say her economic strategy isn't what you expect of a conservative.
Speaker 2: Talk is through her political branding and what her particular
Speaker 2: vision of conservatism looks like.
Speaker 1: So she kind of takes all those boxes of like
Speaker 1: a standard Japanese right wing politician. She wants to see
Speaker 1: a strong Japanese military, she wants to take a bold
Speaker 1: stance on China. So those are classically politically conservative issues
Speaker 1: in Japan. Economically, though, I think Takaichi wants to see
Speaker 1: a kind of rejuvenation of the Japanese economy, and that
Speaker 1: also includes letting companies fail, which was not really something
Speaker 1: politicians wanted to do previously, especially in terms of winning
Speaker 1: votes and having the political strength that comes from these
Speaker 1: sorts of companies that aren't doing too well but are
Speaker 1: being propped up by subsidies from the government. And I
Speaker 1: think the focus is on productivity. Where can Japan's economy
Speaker 1: be more productive and what areas is the Japanese government
Speaker 1: subsidizing that isn't actually as productive as it could be.
Speaker 1: And that is very much focused on investing in the
Speaker 1: areas that need investment, but then slimming down the government
Speaker 1: and being very efficient in governmance in general.
Speaker 2: Now Techichi and her Liberal Democratic Party have secured a
Speaker 2: super majority in the important lower house. What does this
Speaker 2: mean for her politically and the party's ability to push
Speaker 2: through its agenda.
Speaker 1: Now this is huge for Takeichi because it gives her
Speaker 1: such a huge mandate. The ruling coalition still doesn't have
Speaker 1: a majority in the upper house, so there is that roadblock.
Speaker 1: But if you have a supermajority in the lower house,
Speaker 1: the lower house is more powerful than the upper house,
Speaker 1: and it can overrule the Upper House, so that just
Speaker 1: gives her so much of a free hand to push
Speaker 1: through the policies that she wants to see implemented. Overall,
Speaker 1: it's about spending more investing in the areas that need
Speaker 1: investment and seeing Japan's economy grow again, investing in an
Speaker 1: economy for Japan that actually sees more growth, like semiconductor
Speaker 1: related sectors and defense companies. She's talked so many times
Speaker 1: on the campaign trail about this island off the coast
Speaker 1: of Japan, Minami Tadishima, that has apparently has rare earth,
Speaker 1: and she's talking about digging up these rare earths to
Speaker 1: ensure that Japan isn't so reliant on other countries or
Speaker 1: a single country for its supply chain of rare earth.
Speaker 1: So this is kind of like the idea, the vision
Speaker 1: that she has for Japan.
Speaker 2: Voters love Prime Minister Sanaitakiichi and overwhelmingly back her vision
Speaker 2: for more assertive but the bond market is spooked by
Speaker 2: her fiscal policies, why her spending plan could be risky,
Speaker 2: and what her win means for Japan's geopolitical ties. That's
Speaker 2: after the break Japan has grappled with economic stagnation for decades,
Speaker 2: but inflation kicked in during the pandemic bloomberg. Zakura Murakami
Speaker 2: says that it's now one of the most pressing issues
Speaker 2: facing the government.
Speaker 1: So Japan in the past thirty years hasn't seen prices
Speaker 1: rise at all. That's a whole generation of people who
Speaker 1: have not experienced inflation. But now in the past couple
Speaker 1: of years or so, we're actually seeing inflation in earnest.
Speaker 1: One of the most emblematic changes is the price of rice.
Speaker 1: It doubled in about a year, and rice is basically
Speaker 1: like the eggs or you know, the bread of the
Speaker 1: average household in Japan. It's the staple grain. Before you know,
Speaker 1: the price of everything has just gone up, and this
Speaker 1: is really weighing on the average Japanese household.
Speaker 2: To help families struggling with inflation, Takeiichi promised a two
Speaker 2: year cut to the sales tax on food and non
Speaker 2: alcoholic drinks, but it was a controversial pledge. The move
Speaker 2: would cost about thirty two billion dollars in lost revenue annually.
Speaker 2: That's about six percent of what the country collects in taxes.
Speaker 2: Sakura says that investors were already uneasy about Japan's massive
Speaker 2: public debt, the highest among developed nations, and they're now
Speaker 2: rattled about a big spending plan with no clear way
Speaker 2: to pay for it.
Speaker 1: When she started her campaign, she put the sales tax
Speaker 1: cut on food front and center. Through the campaign trail,
Speaker 1: she's really toned down that messaging. She barely mentioned the
Speaker 1: sales tax cut in her rallies in her speeches while
Speaker 1: she was on the campaign trail. I think that goes
Speaker 1: to show the impact the market jitters. Since the election win,
Speaker 1: she's said, well, continue to discuss this. Takayji herself has
Speaker 1: also said, as has the Finance Minister Katayama, that the
Speaker 1: planned tax cut wouldn't require additional bond issuance. They've kind
Speaker 1: of said, we are going to spend aggressively, but an
Speaker 1: important part of that is also spending responsibly. I think
Speaker 1: it's difficult for Takaichu to back out of it at
Speaker 1: this point, but you know, it is really about showing
Speaker 1: that this is doable, this is feasible, that there is
Speaker 1: alternative funding, and we haven't seen that yet.
Speaker 2: Yeah, that seems to be important since we obviously in
Speaker 2: the last few weeks we saw meltdown in Japan's bond market, right,
Speaker 2: is the election results you think like to calm nerves
Speaker 2: in the long run or does it make investors even
Speaker 2: more jittery now that she has public support to push
Speaker 2: her spending policy through.
Speaker 1: So far there's relative calm in the currency. Also in
Speaker 1: the fixed income markets, we're not seeing the kind of
Speaker 1: meltdown that we saw with Liz Trust when she announced
Speaker 1: her kind of physical plans. So I do think the
Speaker 1: aggressive spending part, the sort of tax cut part, tends
Speaker 1: to get more play, but she is really trying to
Speaker 1: emphasize the responsible part of it. She has been consistent
Speaker 1: about saying the plan tax cut won't require additional bond issuance,
Speaker 1: and that's kind of part of the fiscal finance that
Speaker 1: she's trying to portray as well.
Speaker 2: So Gurda, I do want to pivot to geopolitics. Takichi
Speaker 2: made headlines shortly after becoming Prime Minister with controversial remarks
Speaker 2: that suggested Japan could intervene militarily if chinad tag Taiwan.
Speaker 2: Of course, that's stoked tensions with China that are still
Speaker 2: simmering today. With her win at the polls, are we
Speaker 2: likely to see Taki she really doubled down on that
Speaker 2: Hawker stance on China.
Speaker 1: Yeah, part of her appeal has been this kind of
Speaker 1: strong stand she's taken with China and just in general,
Speaker 1: she's like very straightforward, and I think this kind of
Speaker 1: unwillingness to back down under the economic pressure of China
Speaker 1: after her comments on Taiwan really appealed to the public.
Speaker 1: Polls showed that the general public was kind of generally
Speaker 1: in favor with Takaichi's comments and also with how Takaichi
Speaker 1: handled the issue that being said. You know, as I
Speaker 1: mentioned earlier, she's a conventional right wing politician. I think
Speaker 1: one of the things, for example, that she would want
Speaker 1: to do personally is visit Yeskuni Shrine, which is a
Speaker 1: very controversial shrine that honors the Japanese warted, but also
Speaker 1: war criminals passed. Visits to the shrine by Koizumi by
Speaker 1: Abe have really angered, for example, China and South Korea.
Speaker 1: When she was asked about a potential visit to Yescony
Speaker 1: yesterday after the election, she said she wanted to create
Speaker 1: an environment where all countries and all people can honor
Speaker 1: the war dead in the way that they want to.
Speaker 2: Now, we saw President Donald Trump indoors Takeichi before the election,
Speaker 2: and he since congratulated her on the win. US Treasury
Speaker 2: Secretary Scott Bessont also wighed in.
Speaker 4: Boy, has she had a big victory today President Trump
Speaker 4: in doorst last week. She is a great ally, great
Speaker 4: relationship with a president. And when Japan is strong, the
Speaker 4: US is strong in Asia.
Speaker 2: I wonder what we can expect out of these warmer
Speaker 2: US Japan ties. Japan is a US ally sitting right
Speaker 2: next to the biggest US rival, China? How is she
Speaker 2: going to navigate being sandwiched between the to global rivals
Speaker 2: on the world stage.
Speaker 1: So she's very much sort of leaning into her personal
Speaker 1: relationship with Trump. They have this natural rapport. She'll be
Speaker 1: going to the US in March ahead of Trump's visit
Speaker 1: to China. Trump has always grumbled about the US having
Speaker 1: to defend other countries and other countries not really paying
Speaker 1: up for their own defense, and Takaiji is aligned on
Speaker 1: that thinking. She wants Japan's military to be stronger. She
Speaker 1: wants Japan to be capable of defending itself. So when
Speaker 1: she goes to the US in March, that'll probably be
Speaker 1: a topic of discussion between them. Takaichi already has plans
Speaker 1: to revise Japan's defense spending and Japan's defense policy as well.
Speaker 1: On the other hand, China's not going to be too
Speaker 1: happy about that, but that also plays into Takaichi's sort
Speaker 1: of policy with China. In the four months that she's
Speaker 1: been in office, she's already taken quite a strong stand
Speaker 1: against China. She's been very firm about holding her ground
Speaker 1: and I think we'll see more of that during her term.
Speaker 1: And obviously, Japan's economy is very reliant on China's economy
Speaker 1: as well. There's a very strong trade relationship there, but
Speaker 1: Takichi maybe looking into decoupling and making Japan more assertive
Speaker 1: and independent in that respect as well.
Speaker 2: With this huge mandate that Takichi and the party is won,
Speaker 2: she has the power to move her agenda forward. How
Speaker 2: do you think that changes her political calculus going forward.
Speaker 1: I mean, she's been in office for four months and
Speaker 1: the budget that she has passed so far was the
Speaker 1: budget from a previous prime minister. So this is the
Speaker 1: first time that she can actually do things her own
Speaker 1: way and pull together a budget that she wants to
Speaker 1: push through. And obviously, with the huge mandate, from the public.
Speaker 1: She'll be able to push it through Parliament as well.
Speaker 1: So far, given that her hands were tied politically, given
Speaker 1: that she didn't have a clear majority, she didn't quite
Speaker 1: have the space to maneuver in the way that she
Speaker 1: wanted to. But now she has a clear mandate. The
Speaker 1: question now is how effectively can she actually implement the
Speaker 1: policies that she's pledged so far. It's been some talk
Speaker 1: for some time, but will we actually see these policies
Speaker 1: being realized and actually implemented.
Speaker 2: It sounds like this is actually where the hard work
Speaker 2: comes in.
Speaker 1: Right after this, Yeah, right after the Big Wing exactly. Yeah.
Speaker 2: This is The Big Take Asia from Bloomberg News. I'm wanha.
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