Takaichi's Gamble Pays Off: What Japan's Election Landslide Means for Global Markets

311 seats versus 67. The numbers from Japan's lower house election tell a story of political dominance that few saw coming. Prime Minister Sanae Takaichi's decision to call a snap election on February 8, 2026, has delivered the kind of mandate that most leaders can only dream of.

The ruling coalition didn't just win—it crushed the opposition, securing a two-thirds majority that gives Takaichi unprecedented legislative power. It's the first time since 2021 that the Liberal Democratic Party (LDP) has won an outright majority, and the margin suggests Japanese voters have bought into her economic vision.

The Consumption Tax Gamble

At the heart of Takaichi's campaign was a bold promise: suspend consumption tax on food for two years. With Japan's consumption tax currently at 10%, this represents a significant fiscal stimulus that could inject billions into household spending.

"The overwhelming majority of parties favor lowering the consumption tax rate," Takaichi told NHK after the results became clear. "I strongly believe that we need to accelerate discussions on this major issue." Her confidence is understandable—the electoral math gives her the political capital to push through what previous administrations couldn't achieve.

But the economics are more complex. Keidanren Chairman Yoshinobu Tsutsui welcomed the results while urging "prompt and steady implementation of important policies"—a polite way of saying the business community wants to see the details. Japan's public debt already exceeds 250% of GDP, making any tax cuts a delicate balancing act between stimulus and fiscal responsibility.

The Trump Factor

Perhaps most intriguingly, Takaichi's victory comes with an explicit endorsement from Donald Trump. "The potential of our Alliance is LIMITLESS," she posted on X, thanking the U.S. President for his support and expressing eagerness to visit the White House this spring.

This represents a significant shift in Japan-U.S. relations. While previous Japanese leaders maintained careful diplomatic distance from American domestic politics, Takaichi has embraced Trump's backing as a campaign asset. The question now is whether this personal relationship translates into concrete policy coordination—or potential friction with other allies who view Trump more skeptically.

The geopolitical implications extend beyond bilateral ties. Taiwan's President Lai Ching-te offered congratulations in both Chinese and Japanese, a symbolic gesture that underscores the regional tensions Takaichi must navigate. Her November comments about Taiwan being an "existential crisis" for Japan triggered ongoing Chinese aggression, and her strengthened position may embolden more assertive regional policies.

Market Implications and Global Ripples

For investors, Takaichi's victory removes a significant uncertainty. The two-thirds majority means her economic policies won't face legislative gridlock, potentially accelerating implementation of both tax cuts and infrastructure spending. Japanese markets have already responded positively to the prospect of fiscal stimulus, though currency implications remain unclear.

The consumption tax suspension could boost domestic demand significantly, benefiting both Japanese companies and foreign exporters to Japan. Sony, Toyota, and other Japanese multinationals may find themselves with stronger domestic foundations for global expansion, while foreign consumer goods companies could see increased Japanese market penetration.

However, the policy also raises questions about Japan's long-term fiscal trajectory. If successful, other developed nations facing similar demographic and economic pressures might consider similar tax cuts, potentially reshaping global fiscal policy norms.

The Opposition's Collapse

The scale of the opposition's defeat tells its own story. The main opposition Centrist Reform Alliance (CRA) saw its seats plummet from 167 to just 67, while several leaders have already announced resignations. This creates a political vacuum that could persist for years, giving Takaichi unprecedented room to maneuver.

Interestingly, turnout dropped to 28.18% by 7:30 PM, down 3.31 percentage points from the previous election, despite record early voting of 27 million people. Heavy snow affected polling, but the low turnout suggests either voter satisfaction with the status quo or disengagement from opposition alternatives.