Name? Sanae Takaichi
Westphalian identity? Japanese
Age? 65
Why is she in the news? Prime Minister Takaichi announced a new investment plan for artificial intelligence and semiconductors that envisions public and private sector spending of $2.3 trillion by 2040. Previous investments into these sectors have ranged from $18-50 billion, marking a significant increase for the country.
Why do we care? The new plan is a significant step for Takaichi’s administration’s renewed focus on Japan’s debt-to-GDP ratio, which stands at 237% and is the second highest in the world. The Japanese economy has been experiencing stagnation since the 1990s despite structural reforms in the 2010s. It will be interesting to see whether AI, a volatile and unpredictable sector, is the solution Takaichi needs for Japan’s economic problems.
Why should you care? The shift in fiscal discipline from a primary balance target to debt to GDP ratio means that Japan’s economic outlook now hinges on the success of Takaichi’s growth agenda. The announcement has already led the Nikkei 225 to historic highs above 70,000. By jumpstarting growth in underdeveloped sectors Takaichi aims to stabilise Japan’s bond market and by extension, the wider economy. For countries facing similar problems like Singapore and Greece, her policy provides key insights on potential policy directions.
Who else cares?China’s vice premier Ding Xuexiang, currently in charge of the CCP’s semiconductor production, cares as China is a major competitor in the semiconductor industry Given the rising tension between the two nations due to Takaichi’s comments about Taiwan, this plan positions the two leaders as increasingly fierce competitors. In fact, not long after the announcement of Takaichi’s new investment plan, China announced an expansion of its export restrictions on Japan, adding 20 more goods including semiconductors.
Any further comments? Heavy investments into AI despite lagging profits are a major criticism of Takaichi’s proposal with fears of a crash looming ever closer.
