Japanese Prime Minister Sanae Takaichi conducted her first cabinet reshuffle on September 17, retaining key ministers responsible for economic and foreign security policies, including Finance Minister Satsuki Katayama, Minister of Growth Strategy Minoru Kiuchi, Foreign Minister Toshimitsu Motegi, and Defense Minister Shinjiro Koizumi. This decision reflects a preference for continuity in core policies over a major personnel overhaul, suggesting that Takaichi's administration will maintain its existing course of active fiscal policy and enhanced defense capabilities.
According to the Nihon Keizai Shimbun (Nikkei), Chief Cabinet Secretary Minoru Kihara, Minister of Economy, Trade and Industry Ryosei Akazawa, and Minister of Economic Security Kim Onoda also retained their positions. Hiroshi Nakatsuka, former secretary-general of the Japan Innovation Party, was appointed as the Minister of Administrative Reform, marking the party's first cabinet entry since forming a coalition with the Liberal Democratic Party (LDP) last October.
The retention of Katayama and Kiuchi is crucial for economic policy. Both have supported Takaichi's administration's commitment to 'responsible active fiscal policy' from their respective roles in finance and growth strategy. Nikkei reported that Kiuchi initially sought a different position but accepted Takaichi's request to stay, citing a lack of suitable alternatives. The decision to keep both ministers amid market concerns about active fiscal policy demonstrates Takaichi's strong commitment to this approach.
The new cabinet's first challenge will be the reduction of the food consumption tax. The Japanese government plans to lower the food consumption tax rate from the current 8% to 1% for two years starting in April 2027. While this initiative requires an annual budget of 5 trillion yen, the means to secure this funding have not yet been outlined. Katayama, who will also oversee the related legislation, called it the 'cabinet's top priority,' but passing it in the extraordinary Diet session scheduled for early October remains uncertain. The ruling party lacks a majority in the House of Councillors, and Asahi Shimbun reports that gaining support from the opposition appears unlikely.
Maintaining market confidence while continuing active fiscal policy is another challenge. Japan's long-term interest rates have risen to around 3% for the first time in nearly 30 years, and the budget requests for the 2027 fiscal year have ballooned to a total of 143 trillion yen. Kiuchi stated that this does not mean indiscriminate fiscal expansion and pledged to communicate with market participants to alleviate concerns. However, Asahi Shimbun noted that he has previously made comments that seemed to unsettle the bond market regarding the Bank of Japan's interest rate hikes. With further rate increases anticipated, managing the rising burden of government bond interest while securing growth investments remains a key task for him.
In the foreign and trade sectors, existing leaders were also retained. Foreign Minister Motegi briefly engaged with the foreign ministers of China and Russia, whose relations with Japan have cooled, during the ASEAN-related foreign ministers' meeting in July. Asahi Shimbun characterized this as leveraging the connections he built during his previous tenure. Akazawa, the Minister of Economy, Trade and Industry, previously served as Japan's chief negotiator in U.S.-Japan tariff talks and led efforts to secure alternative oil and naphtha supplies during the Hormuz Strait crisis, earning praise for building a close relationship with the U.S. Secretary of Commerce.
Koizumi continues to lead the revision of three key security documents, including the National Security Strategy, which form the foundation of Japan's foreign and security policy. He has been involved in amending the operational guidelines of Japan's arms export rules, allowing for the full export of lethal weapons. With Koizumi's retention, the trend toward strengthening defense capabilities and expanding arms exports is likely to continue.
This cabinet reshuffle also appears to be strategically aimed at the upcoming LDP presidential election in the fall of 2027, which will effectively determine the next prime minister. Asahi Shimbun analyzed that Takaichi's decision to keep Motegi and Koizumi in key positions aims to prevent them from consolidating as a counterforce against her, following their competition in last year's presidential election.
In contrast, Yoshimasa Hayashi, the former Minister of Internal Affairs, who received more votes than Takaichi in the first round of last year's LDP presidential election, was excluded from the cabinet. According to Asahi Shimbun, there have been concerns among Takaichi's inner circle that keeping him outside the cabinet could lead him to challenge her authority. Nikkei speculated that Hayashi, who has been cautious about the consumption tax cut and emphasizes dialogue with China, may pursue an independent path outside the cabinet as he prepares for the next presidential election.
Meanwhile, there is controversy surrounding the appointments of Kazuo Yana and Yoshihiro Seki, both implicated in the LDP faction slush fund scandal that emerged in 2023. According to Yomiuri Shimbun, these are the first instances of lawmakers involved in the scandal being appointed to cabinet positions after the incident came to light. Opposition parties are expected to pursue this issue in the upcoming extraordinary Diet session in October.
* This article has been translated by AI.
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