China's inflation may burst Japan PM's economic bubble

Japan's Prime Minister Sanae Takaichi has experienced a whirlwind start to her tenure, impressing former U.S. President Donald Trump one week while aggravating China the next. Despite operating on only a few hours of sleep nightly, she currently enjoys high approval ratings. However, her early momentum could face challenges if tensions with China escalate or if inflation continues to rise.

"I trust Prime Minister Takaichi to take the necessary actions," said Kozue Otsuka, 50, during a festival for business owners seeking good fortune. While purchasing a lucky "kumade" rake adorned with a cheerful goddess, she added, "I hope Japan-China relations improve gradually."

Shigeru Fujita, 78, who runs a gardening business, expressed concern about Takaichi's recent comments. "The prime minister's remarks caused real agitation in China," he said. Takaichi herself admitted to sleeping only two to four hours a night.

A week into her term, Takaichi received praise for her efforts to accommodate Trump. She presented him with a golf club once used by the late former Prime Minister Shinzo Abe, a mutual friend. Trump responded by saying she could become "one of the greatest prime ministers."

Prior to this, Takaichi attended an ASEAN summit in Malaysia and an APEC meeting in South Korea, where she met Chinese President Xi Jinping. Although the meetings appeared cordial, her subsequent remarks in parliament about a potential Taiwan "emergency" and Japan's possible military involvement triggered a diplomatic storm. Chinese authorities warned citizens to avoid Japan, and reports indicated a reinstatement of restrictions on Japanese seafood imports. Analyst Margarita Estevez-Abe from Syracuse University noted that "China still holds many economic levers to punish Japan, while Japan has few options."

Takaichi recently introduced a $135 billion economic stimulus package including cash payments to parents and energy subsidies, aiming to avoid the political pitfalls faced by her predecessor Shigeru Ishiba amid rising prices. Despite initiatives to curb spending and promises of fiscal responsibility, concerns persist that the stimulus could exacerbate Japan's debt, contributing to yen depreciation and rising import costs. Kazuo Kaitsuka, 75, warned that "ordinary people are struggling, and future generations might face the consequences."

Her cabinet currently enjoys a 72 percent approval rating according to a Yomiuri survey, and even her handbag has gone viral, boosting sales for its 145-year-old manufacturer. Speculation has arisen about possible snap elections. However, analyst Tobias Harris from Japan Foresight questioned the durability of her popularity, particularly if tensions with China persist. He added that while Takaichis support has been strong, it has not necessarily strengthened the ruling Liberal Democratic Party, and prolonged disputes with China could eventually weigh on her position.

Analysis: The High Stakes of Prime Minister Sanae Takaichi's Early Leadership

Prime Minister Sanae Takaichi's first weeks in office have been marked by both accolades and controversies. While her diplomatic engagement with former U.S. President Donald Trump and her push for a robust economic stimulus package have earned her high approval ratings, her escalating tensions with China present a potential obstacle to her long-term political stability.

Her swift diplomatic moves, including presenting Trump with a special gift and engaging with Chinese President Xi Jinping at international summits, seemed calculated to bolster Japan's global position. However, her statements regarding Taiwan and Japan’s potential military role have sparked a backlash from Beijing, highlighting the delicate balance Takaichi must maintain in foreign relations. Despite her efforts to boost Japan's economic recovery, concerns about rising inflation and a growing national debt have created uncertainty for both her government and the Japanese public.

The approval ratings, currently at 72 percent, reflect optimism in her early days, but as analysts like Tobias Harris from Japan Foresight have noted, these numbers may not hold if her confrontations with China escalate. The key challenge for Takaichi will be navigating these complex international relations while managing domestic economic pressures, all without risking the stability she has worked hard to establish in her first term.

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• China, inflation could pop Japan PM's bubble