Takaichi Government Pushes Tax Cuts as Approval Stays High; Budget Passage Within Fiscal Year Becomes Top Priority

TOKYO — The administration of Prime Minister Sanae Takaichi is accelerating its push for tax cuts while maintaining strong public support, a political backdrop that may enable the government to pass the national budget within the fiscal year even if it requires a forceful vote in parliament.

Approval rating remains unusually high

A nationwide opinion poll released March 1 by the Japan News Network showed the Takaichi cabinet's approval rating rising 1.9 percentage points from the previous survey to 71.8%, an exceptionally high level for a Japanese administration.

Cabinet approval ratings in Japan typically start high after an administration takes office before gradually declining. However, Takaichi's popularity has so far shown little sign of fading.

The prime minister's emphasis on delivering results — including her determination to secure passage of the national budget within the current fiscal year — has heightened expectations among both the public and the business community. The trend has also fueled speculation that her government could evolve into a long-term administration.

Determined to pass a full budget, not a stopgap

Takaichi has repeatedly stressed the need to pass the full national budget before the end of the fiscal year, saying she intends to honor campaign pledges made to voters during the most recent lower house election.

The prime minister has openly said she admires former U.K. Prime Minister Margaret Thatcher, often referred to as the "Iron Lady." Observers say Takaichi may be seeking to demonstrate similar political resolve by ensuring the passage of a full budget rather than relying on a provisional one.

Her decisive victory in the recent lower house election has also strengthened her confidence, providing what she sees as a clear mandate from voters.

Middle East tensions add urgency to budget vote

Rising geopolitical tensions have added urgency to the government's timetable. Military action by the United States and Israel against Iran has escalated into a large-scale conflict in the Middle East, prompting Tokyo to move quickly to secure fiscal stability.

Takaichi is also aiming to pass the budget through the lower house before her planned meeting with U.S. President Donald Trump on March 19.

Reflecting the prime minister's stance, the ruling coalition of the Liberal Democratic Party of Japan and the Japan Innovation Party has proposed holding a final round of questioning in the Lower House Budget Committee on March 13 before moving to a vote on the fiscal 2026 budget.

Budget Committee Chair Tetsushi Sakamoto has already exercised his authority to schedule ministry-by-ministry reviews from March 4 to 6, effectively laying the groundwork for a potential vote.

While it remains unclear whether the ruling parties will ultimately force the vote, the procedural conditions are increasingly in place.

Even if such a move triggers backlash from opposition parties, the government believes voter criticism would likely remain limited because the budget is framed as protecting households and economic stability.

Tax policy at the center of Takaichi's agenda

A central pillar of Takaichi's economic agenda is reforming Japan's consumption tax system.

Her administration is pursuing two major policies:

1. Eliminating the consumption tax on food products for two years
2. Introducing a refundable tax credit system, followed by restoring the food tax rate to 8% after the temporary tax break

The two-year food tax exemption is intended as a transitional measure before the introduction of the refundable tax credit scheme.

Because these reforms cannot be implemented quickly, the agenda implies that Takaichi will likely need to remain in office for at least three to four years to oversee both stages of the policy rollout.

Political base strengthened by election landslide

Takaichi's political base within the ruling party also appears increasingly secure.

The governing coalition won 316 seats in the lower house election, producing a large number of newly elected lawmakers often described as "Takaichi children," referring to politicians aligned with her leadership.

These lawmakers are widely expected to support her in the next leadership race of the Liberal Democratic Party of Japan scheduled for autumn 2027. With many legislators likely to back the perceived front-runner, potential challengers may be reluctant to enter the race.

If Takaichi secures another term as party leader, analysts say the ruling party could also perform strongly in the next upper house election, potentially paving the way for a prolonged administration comparable in longevity to that of Yuriko Koike, the long-serving governor of Tokyo.

Market implications: stability welcomed by investors

Political stability is generally seen as a positive factor for financial markets.

While heightened tensions in the Middle East could trigger short-term volatility in Japanese equities, investors may increasingly price in expectations of a prolonged Takaichi administration.

If those expectations strengthen, analysts say a renewed "Takaichi trade" — investor optimism tied to the administration's policies — could eventually reemerge in Japan's stock market.