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Takaichi’s choice: revolution, reform or regression

Without bold action, the new prime minister will lack the momentum for enduring leadership

Japan’s new Prime Minister Sanae Takaichi stands at a crossroads. Her choices will define not only her legacy but the nation’s trajectory for the next decade and beyond.
As the country’s first female prime minister, she can choose revolution through bold pragmatic reforms, settle for incremental change or fail to act decisively. Her choice will determine whether Japan breaks free from its decades-long economic malaise or continues its slow decline into irrelevance.

The revolutionary path requires Takaichi to channel the dynamism of Japan’s most competitive sectors. These include automobiles, robotics, gaming and precision manufacturing across the broader economy. It includes rapidly deploying artificial intelligence and other technologies to increase productivity, creativity and employment flexibility that act as stopgaps on family formation and socioeconomic dynamism.

This means aggressive deregulation, genuine decentralization of economic power from Tokyo and policies that unleash the entrepreneurial energy that typified Japan’s postwar period until the bubble burst in the early 1990s. It means confronting the keiretsu system that stifles innovation and the regulatory capture that protects inefficient industries.

Central to this revolution must be a three-pronged demographic strategy. First, invest in gender equality while promoting family formation. Japan cannot afford to waste half its human capital. Takaichi should mandate corporate boards to achieve 30% female representation within five years, expand child care facilities tenfold and introduce tax incentives that make having children economically rational rather than punitive. Yes, encouraging childbearing alongside women’s economic participation isn’t contradictory, it’s essential for survival.

In simple terms, if Japan has fewer families with fewer children, it has no future as families are the cornerstone of a nation’s sustainability.

Second and equally critical is a foreign-labor policy explicitly distinguished from immigration. Takaichi should expand the Specified Skilled Worker program to include eldercare professionals, allowing 500,000 workers over five years with clear paths to skill development but not permanent residency without the appropriate language skill set. She should create bilateral agreements with Vietnam and Indonesia for rotational agricultural workers during harvest seasons, addressing rural labor shortages without permanent settlement.

Third, she should establish “tech talent visas” for software engineers and AI specialists, offering five-year renewable permits tied to employment in designated innovation zones. These policies address labor needs while maintaining social cohesion. This is a balance other developed nations have failed to achieve and in the context of Japan, it is arguably a more difficult puzzle to solve considering its “in” and “outside” group dynamics, comparatively little experience with social integration of nonethnic Japanese, as well as its rigid social system.

The Liberal Democratic Party’s political alliance with Japan Innovation Party may be part of that formula. The Osaka-based JIP is reformist with a decidedly progressive agenda in a Western context (reducing insurance premiums, free high-school education, defending LGBTQ rights, administrative and legislative reform and many others).

In foreign policy, strengthening the U.S.-Japan alliance is indeed a “no-brainer,” but execution matters. Takaichi should propose joint development of hypersonic missile-defense systems, quantum computing initiatives and space-based surveillance capabilities. These projects would create interdependencies that transcend any single American administration’s transactional impulses.

More innovatively, she must build a coalition of middle powers. It should include India, Australia, South Korea, Canada and the European Union to collectively engage Washington. When these partners jointly invest in semiconductor manufacturing, rare-earth processing and 6G development, they become indispensable to U.S. strategic interests. This isn’t about containing China; it’s about creating a gravitational pull that keeps America engaged regardless of whether the occupant of the White House favors “America First” or traditional alliances.

Such multilateral defense and technology cooperation serves dual purposes. First, it deters authoritarian aggression while injecting revolutionary technologies into partner economies. Joint development of AI-powered manufacturing, quantum encryption and clean-energy systems would boost productivity and prosperity across the alliance network.

The alternative is reform through incrementalism, and this approach offers a familiar but inadequate path. This strategy, pursued by every Japanese leader since the bubble economy burst, has produced decades of economic stagnation masked by social stability. Astonishingly, Japan’s gross domestic product per capita has fallen from 90% of America’s in 1995 to barely 60% today. Youth unemployment festers beneath misleading statistics and regional cities hollow out as Tokyo absorbs what little dynamism remains.

What Dutch social scientist Geert Hofstede called “cultural dimensions” partly explains this paradox. Japan’s extreme uncertainty avoidance, collectivism and hierarchical orientation have maintained social cohesion despite economic decline. But cracks are showing. The rise of anti-immigration populist parties like Sanseito signals that even Japan’s legendary social stability has limits. Incrementalism might buy Takaichi a year or two of relative calm, but without bold action, she’ll lack the political momentum for enduring leadership.

Former Prime Minister Shinzo Abe, Takaichi’s mentor, was relatively successful in putting Japan back on the geopolitical map not because of one extraordinary policy but because he was in power for eight years. It was enough time to follow through with policies, refine them or find new ones. As the Japanese expression goes, keizoku wa chikara nari (continuity is strength) — and Abe had eight years of continuity.

The failure scenario is grimmer still. If Takaichi retreats to LDP factional politics, avoiding controversial reforms while placating various interest groups, her historic position as Japan’s first female prime minister will be reduced to a footnote.

Worse, her failure would likely usher in another era of revolving-door prime ministers, further diminishing Japan’s international standing and its capacity to address mounting domestic challenges. The world would write off Japan as a formerly great power content with managed decline.

Great politicians understand that pragmatism means adapting principles to circumstances, not abandoning them. Abe embodied this approach. Despite his conservative nationalist reputation, the former prime minister pragmatically engaged China through 55 infrastructure agreements, stabilizing relations after the 2012 Senkaku Islands crisis. Simultaneously, he strengthened ties with the U.S., India and Australia while pursuing domestic reforms through trade liberalization, expanded foreign worker programs, corporate governance changes and “womenomics.”

Not all of Abe’s initiatives succeeded, but they demonstrated a pragmatism that Takaichi should internalize without copying. She doesn’t need to be Shinzo Abe 2.0; she needs to be Sanae Takaichi, the pragmatic revolutionary.

Her survival of the LDP’s ageist, male-dominated political machinery suggests she possesses the necessary cunning and resilience. The question is whether she’ll apply these skills to transformative governance or merely to political survival. Japan cannot afford another leader who mistakes staying in office for leadership.

Her coalition with the JIP to win the prime ministership is indicative that she is pragmatic and wedded to economic reform while adopting more progressive policies. Rather than conservative in the Western sense, these policies would be very familiar in Canada and Australia — two countries that would not be characterized by “right-leaning” policies or leadership.

The stakes couldn’t be higher. Japan faces demographic collapse, economic stagnation, technological disruption and an increasingly dangerous neighborhood. China’s Sept. 3 grand parade of “peace” was anything but. Russia’s invasion of Ukraine is not about national cohesion but about subjugation and North Korea’s nuclear weapons are tools of brinkmanship, not peace and stability.

Takaichi has the opportunity to be one of Japan’s most consequential leaders since the Meiji Restoration. Whether she seizes it will determine not just her legacy, but whether Japan thrives, survives or slowly fades into history. The choice is hers, but the consequences are Japan’s and arguably friends and allies of Japan who prioritize rule-of-law, good governance and open societies.

Stephen R. Nagy is a professor of politics and international studies at the International Christian University in Tokyo and a visiting fellow with the Japan Institute for International Affairs. The tentative title for his forthcoming monograph is “Navigating U.S. China Strategic Competition: Japan as an International Adapter Middle Power.”

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