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Darian Woods (3:10)

Sanae Take Ichi can reinvigorate the Japanese economy, we have to first make a diagnosis and we can read Japanese economic indicators all day. A lost 30 years of basically flat incomes, the yen falling. But what does it feel like to live in Japan right now?

Waylon Wong (3:30)

We hit the streets of Kobe, one of Japan's large cities.

Interviewee (3:33)

Hi, my name is Julie Nguyen.

Darian Woods (3:35)

Julie works at a mental health clinic.

Interviewee (3:37)

Things are a bit tight financially. Recently I just got divorced and then I'm raising 4k kids and I work for a part time job.

Waylon Wong (3:50)

Julie wasn't happy about rising prices.

Interviewee (3:53)

Everything's increasing so much, like groceries, electricity, like just basic cost for a living.

Darian Woods (4:04)

We also spoke with Kanoa Konda, a grad student at Kobe University and she echoed this complaint.

Interviewee (4:10)

I was like life prices going high.

Waylon Wong (4:13)

So did Yukihiro Imanari, an advisor at a science and policy network.

Fumigato (4:18)

Basically we have enough money to live, but you fear the rise of the prices.

Darian Woods (4:23)

The people we spoke to had their own views of what they were hoping for from the Prime Minister. Support for working mothers, more money for scholarships, avoiding immigration crackdowns.

Waylon Wong (4:34)

Sounds awfully familiar.

Darian Woods (4:36)

Yeah, things like childcare, college costs, immigration and of course the cost of living, that was the common thread. So what could Sanae take Ichi do to combat price rises?

Waylon Wong (4:48)

As we've talked about before, most economists would agree that politicians don't actually hold the big lever to fight inflation. That's primarily the responsibility of the central bank. Raising interest rates to slow down borrowing and spending in the economy and bring down inflation. So step number one is to get out of the way of the bank of Japan. The bank of Japan has been slowly raising interest rates from basically zero where they were for about two decades.

Darian Woods (5:13)

Yeah, for decades they were struggling to get any inflation. And you know, a small amount is good for an economy.

Waylon Wong (5:20)

And that return to lifting interest rates has been called normalization. Fumigato is a lecturer in East Asian political economy at the University of Sheffield.

Fumigato (5:28)

The Prime Minister wants slower pace of normalization.

Darian Woods (5:33)

Basically Takaichi wants lower interest rates than the central bank does. Lower interest rates would be the opposite of what's needed to curb inflation. Sure, it could mean cheaper mortgages or car loans, but all that extra borrowing by people and businesses would mean more spending, which would lead to higher prices.

Waylon Wong (5:52)

We asked Fumigato whether the Prime Minister could influence the central bank in Japan.

Fumigato (5:57)

There may be some kind of theoretical independence, but I think it's difficult for the central bank to directly goes against what the government wants.

Waylon Wong (6:07)

It's difficult for the bank of Japan to go against what the government wants, partly because there's government representatives actually Sitting at the table when the central bank makes its decisions.

Darian Woods (6:17)

Yeah, those eyeballs are kind of quite intimidating.

Waylon Wong (6:21)

So even though the bank of Japan is legally independent from the government, the reality is more complex. You often see the two coordinate policies. So Fumi thinks it could be possible that Takechi's preferences for lower interest rates could be taken into account.

Darian Woods (6:36)

Politicians can do more than get out of the way of the central bank. They can also make the central bank's job easier by taking their foot off the fiscal accelerator. That's step number two, basically pulling back on spending or taxing more. Less borrowing.

Fumigato (6:52)

The current administration is more interested in fiscal expansion and then strengthening the military.

Darian Woods (7:00)

So the opposite of cutting back. In November, Takaichi's cabinet approved a $135 billion stimulus package. That means more borrowing and spending. Broadly, this kind of borrowing and spending worsens inflation.

Waylon Wong (7:16)

There is a third step that could reduce inflation, and that's if Japan's productivity increases. Productivity could be the skeleton key that unlocks not just stable prices, but increased wages too. So it's important.

Darian Woods (7:29)

One way to increase productivity could be to invest in infrastructure or industries. That allows Japan to make more stuff or be more efficient. Fumi says Takechi is trying to spend more money to make Japan's exports more competitive in certain industries, like semiconductors. So the result of this is to be seen.

Waylon Wong (7:49)

Another potential way to increase productivity is increased immigration, bring in more skills and ideas, and labor that could grow Japan's businesses. But Fumi says Takaichi is a nationalist, so that's not her first instinct.

Fumigato (8:03)

She would like to restrict the influence of immigrants.

Darian Woods (8:07)

So overall, Sanae Takechi seems like a bold leader, but not one that follows economic orthodoxy. She wants lower interest rates, more spending, less immigration.

Waylon Wong (8:18)

That explains why investors aren't convinced. The day that Take Ichi's big stimulus package was announced, the Japanese Nikkei stock market fell 2.5%. And interest rates on loans to the Japanese government are even higher than they were in the 2008 financial crisis.

Darian Woods (8:34)

The everyday people we heard from in Japan didn't vote for Takaichi directly. Japan has a parliamentary system, so you vote for parties and representatives, not for prime ministers. But these people in Kobe had their views. Julie Wen, the mental health worker and mother, had positive first impressions.

Interviewee (8:53)

She seems, like, strong and reliable. So, yeah, hopefully she can help families or working moms. But we also need to see how she actually does.

Waylon Wong (9:15)

Kanukanda, the graduate student, was more circumspect.

Sponsor Announcer (9:18)

I don't know.

Waylon Wong (9:19)

It's not gonna really, like, directly affect my finance situation.

Darian Woods (9:23)

And Yukihiro Imanari, the science and policy advisor, was less of a Takaichi supporter. In fact, he was worried.

Fumigato (9:31)

I'm a little bit afraid of this person because I see her on the far right wing of wdp. Because I'm Japanese national, I think I will be fine. But my wife is a foreigner. I could imagine that at some point I would say, oh, let's go away from this country. I cannot live here anymore.

Waylon Wong (9:54)

Overall, though, Sanae Takeichi's rambunctious approach is winning over Japanese voters. Takechi's administration now enjoys around a 70% approval rating, but with inflation showing no signs of slowing down, we'll see how long that lasts.

Darian Woods (10:10)

This episode was produced by Angel Carreras, Catherine Yang and Corey Bridges, with engineering by Kwesi Lee and Sina Lofredo. It was fact checked by Cierra Juarez. Cake and Cannon edits the show, and the indicator is a production of npr.

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