Japan is set to appoint its first female prime minister, with conservative leader Sanae Takaichi expected to secure parliament’s vote on Tuesday following a coalition agreement with the Japan Innovation Party (Ishin).
The alliance gives Takaichi’s ruling Liberal Democratic Party (LDP) and Ishin a combined 231 seats in Japan’s lower house—just two short of a simple majority but enough to ensure victory in the prime ministerial ballot. “I look forward to working together to strengthen Japan’s economy and transform the country,” Takaichi said during the coalition signing ceremony with Osaka Governor Hirofumi Yoshimura and Ishin’s parliamentary head Fumitake Fujita.
Under the agreement, Ishin secured commitments for parts of its small-government agenda, including a 10% reduction in the number of lawmakers and a two-year suspension of consumption tax on food. The deal also includes deadlines for implementing specific policies aimed at boosting Japan’s sluggish economy.
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Fujita confirmed the pact formalises cooperation between the two right-leaning parties, describing it as a “pragmatic partnership” that balances fiscal discipline with public support.
News of the coalition lifted investor sentiment. The Nikkei 225 index surged 3.4%, reaching a record high, while the yen weakened against the dollar as markets anticipated larger government spending under Takaichi’s leadership.
“Takaichi’s proposed mix of fiscal expansion and continued monetary easing appears to be driving optimism among investors,” said Fumika Shimizu, a strategist at Nomura Securities.
Although Takaichi has called for higher public spending and tax cuts to shield consumers from inflation, Ishin’s preference for budget restraint may temper her ambitions once in office.
The new coalition follows the collapse of the LDP’s 26-year alliance with Komeito earlier this month. Komeito withdrew after the LDP elected Takaichi as its leader, sparking fears the ruling party could lose its grip on power for the first time in more than a decade.
By siding with the LDP, Ishin has effectively secured Takaichi’s path to leadership and ended uncertainty over Japan’s political direction. However, to govern effectively, she must still court support from smaller opposition parties—especially for key legislation like the upcoming supplementary budget.
