How Long Can Takaichi Stay in Power - and What Would Her Exit Mean for Markets?

by Kenichi Ogura, Former Chief Editor of business magazine “PRESIDENT”

The most important electoral test is likely to come in 2028

Sanae Takaichi is politically secure for now. In the February 2026 election, her Liberal Democratic Party won 316 of the 465 seats in the House of Representatives. Together with Nippon Ishin, the governing alliance controls 352 seats. The LDP alone holds more than the two-thirds majority needed to override the upper house on ordinary legislation, leaving little immediate risk of the government being defeated in parliament.

Under current LDP rules, the party president serves a three-year term and may serve three full terms, including two consecutive re-elections. A leader chosen after a midterm resignation first completes the predecessor's remaining term, which does not count toward that limit. Takaichi replaced Shigeru Ishiba in October 2025. If she wins the party leadership elections scheduled for 2027, 2030 and 2033, she could remain LDP president until autumn 2036.

That is the maximum allowed under the present rules, not the most likely outcome. Reaching it would require her to remain healthy, avoid a damaging defeat in the 2028 House of Councilors election, overcome internal challengers and keep the LDP in power through subsequent lower-house elections.

The most important electoral test is likely to come in 2028. Her commanding lower-house majority protects her from the opposition, but it cannot protect her from her own party after a national defeat. Japanese prime ministers often fall when their lawmakers decide that they have become an electoral liability. A strong upper-house result would instead suggest that the February landslide was more than a temporary surge and make a leadership challenge harder to organize.

Takaichi may also be tempted to hold lower- and upper-house elections on the same day. No such plan has been announced, but her conduct in early 2026 makes the possibility difficult to dismiss. Only three months after becoming prime minister, she dissolved the lower house and turned a razor-thin majority into a supermajority. The gamble gave the LDP 316 seats. A leader rewarded so handsomely for choosing the election date is unlikely to ignore the option of trying the same strategy again.

Victory in a double election would give the lower house a term running to 2032, unless it were dissolved earlier, and would remove the immediate argument for replacing her. She would still need to win another lower-house election by then if she hoped to remain prime minister until 2036. Even so, a convincing victory in 2028 would open a credible route to the maximum tenure permitted under LDP rules.

Her political strength cannot remove the uncertainty surrounding her health. Takaichi has publicly disclosed that she has rheumatoid arthritis. During the February campaign, she visited hospital after symptoms in her hand worsened. In March, she became unwell after a parliamentary session, cancelled engagements and returned to the prime minister's residence. The government described the March episode as cold-like symptoms; there is no confirmed link between that incident and her rheumatoid arthritis.

These episodes do not show that she is unable to serve. Nor can public appearances reveal the severity of her condition or its likely effect on her work. But the issue cannot be dismissed. The Japanese premiership requires long parliamentary sessions, frequent travel, demanding diplomacy and rapid decisions during crises. A large majority offers no protection if a prime minister can no longer maintain that pace.

Cancelled meetings, shortened appearances and missed overseas visits will therefore attract close attention. The government cited Diet scheduling and other considerations when explaining her absence from the July NATO summit; it did not attribute the decision to illness. Even so, questions about her stamina will persist because health is the one factor that could abruptly alter the political timetable.

It could weaken her authority without warning. It could also provide an honorable reason to step down after a major election victory or policy achievement. That possibility is not a medical forecast, but it is an unavoidable part of any political assessment of how long her government may last.

The "Takaichi trade" has generally meant stronger equities

Markets impose a different constraint. The "Takaichi trade" has generally meant stronger equities, pressure on government bonds and a weaker or more volatile yen. It rests on expectations of tax cuts, industrial support and a preference for only gradual monetary tightening. Her February victory pushed Japanese shares to record levels, but bond yields also rose as investors considered the fiscal cost of her programme.

Japan's fiscal 2026 general-account budget reached a record 122.3 trillion yen. Parliament later enacted a 3.1 trillion yen supplementary budget covering energy subsidies and other cost-of-living measures. In July, the yield on the 10-year Japanese government bond reached 2.9%, its highest level in about 30 years. Higher yields raise future debt-servicing costs and reduce the government's room for further fiscal expansion.

The benign version of the Takaichi trade is straightforward: rising share prices, moderate yen weakness and a gradual increase in interest rates. The dangerous version is a simultaneous selloff in the yen, government bonds and equities. That would raise import costs, worsen inflation and weaken household purchasing power. Under those conditions, the bond market could constrain the government more effectively than the parliamentary opposition.

The market reaction to Takaichi's departure would depend on why she left and who replaced her. An orderly transition to a more fiscally cautious leader would probably support the yen and reduce upward pressure on bond yields. Defense, semiconductor and technology shares associated with her industrial policies could fall. A sudden resignation caused by health problems would be more disruptive because markets would have less time to assess the succession.

Takaichi is likely to survive at least until the 2027 LDP leadership election. The 2028 upper-house vote will then show whether hers remains a medium-term government or develops into an unusually long premiership. A serious defeat would reopen the succession question inside the LDP. A decisive victory, especially in a double election, would give her the authority to seek every party term available to her.

Her position is unusually strong, but longevity is not guaranteed. Health could shorten her tenure without warning, while an electoral setback in 2028 could turn party allies into challengers. If neither occurs, Takaichi has a plausible route to remaining in power well into the 2030s - and perhaps until autumn 2036.