Is Takaichi Sanae the ‘Iron Lady’ of Japan?

For the first time in its history, Japan's parliament has selected a woman, Takaichi Sanae of the Liberal Democratic Party, to be prime minister.

- Koichi Hamada

In this sense, Ms Takaichi has already followed in the footsteps of her political idol, Margaret Thatcher — the UK's first female PM. But whether she is remembered as Japan's own “Iron Lady’ will depend on her ability to manage three key challenges: inflation, low female labour-force participation and a fraught geopolitical environment.

A protégé of former PM Abe Shinzo, who was assassinated in 2022, Ms Takaichi has promised to revive his economic-policy approach which used monetary and fiscal expansion to lift Japan out of decades of deflation and recession. But the situation Abe confronted in 2012 was very different from the one Ms Takaichi faces today. Back then, an overvalued yen had triggered deflation and was fuelling underemployment, so aggressive monetary easing was vital to stem currency appreciation.

Today, by contrast, Japan is experiencing its first bout of inflation in decades. Yen depreciation is causing Japan's terms of trade to deteriorate, with lower export prices reducing revenues, and higher import costs squeezing Japanese households. Moreover, as of September 2025, the jobs-to-applicants ratio was 1.2, indicating that, far from an unemployment problem, Japan is now grappling with a labour shortage. And while the stock market appears strong, there is a risk of a bubble, which could harm investors in the event of a collapse.