Bruno Tesch
Sanae Takaichi, Japan’s new head of government elected on 21 October, stands for a rightward shift, racism and militarism. Her election was preceded by a political crisis that also engulfed the ruling Liberal Democratic Party (LDP). After it lost its absolute majority in parliament, the previous prime minister, Shigenu Ishiba, resigned from his posts as head of government and party leader in September 2025 and served only as interim prime minister until a successor was found.
At the beginning of October, the time had come. Takaichi won the LDP leadership, paving the way for her to become head of government. She stands on the far right wing of the ruling party, has formed an alliance with the right-wing JIP (Renewal Party) and stands for ‘Japanese first’ – against migration, against tourism, for rearmament and has, once again, promised to boost the economy.
Of course, the global shift to the right forms the backdrop to Takaichi’s rise. However, the change of government must also be understood in the broader context of the decline of Japanese imperialism since the 1990s.
Japan’s rise
Japan was one of the losing nations of World War II. Its post-war development bears striking parallels to the development of the Federal Republic of West Germany. Both were rebuilt with massive injections of US capital. At the same time, their exposed frontline position at various key points around the globe made them ideal as geostrategic bases for Western imperialism against the degenerate workers‘ states (Eastern Europe, Soviet Union, China, North Korea) that were forming a bloc. Both were involved in military pacts (NATO and SEATO), but were not allowed to possess nuclear weapons. Japan was completely disarmed and even had to renounce its own operational forces. There are still 55,000 US soldiers stationed there permanently and the costs for this are foisted on the Japanese state budget.
Like the Federal Republic of Germany, Japan experienced an exorbitant boom thanks to low entry-level wages and high investment in export-oriented demand, particularly in the automotive industry and modern technologies, and gained a leading position among the imperialist powers through the accumulation of national capital. In the 1970s and 1980s, the country developed into the strongest economic challenger to the USA.
The ongoing ‘Japanese crisis’
Because of Japan’s large foreign trade surpluses, the US government at the time pushed for the removal of traditional trade barriers. They successfully pushed through a devaluation of the dollar against Japan and Germany, disadvantaging their most important imperialist rivals. The subsequent appreciation of the yen, the national currency, in 1985, exacerbated the situation as massive amounts of capital now flowed into the Japanese real estate and stock markets, driving up prices. The yen appreciated by 73% between 1985 and 1988.
The closure of its own market to imports in order to subsidise exports also led to a disproportionate rise in consumer goods prices at the end of the 1980s. In line with the global trend, Japan deregulated its financial market in the 1980s. The lax approach to lending artificially inflated the financial sector. At the same time, the inflated property bubble was threatening to burst.
In 1990, the total market value of all Japanese companies listed on the stock exchange was three times the market capitalisation of companies listed on American stock exchanges, even though the gross domestic product of the USA was more than twice as high. In 1990, the Japanese central bank raised interest rates to prevent the economic bubble from growing further. This marked the beginning of deflation, which has continued virtually unabated to this day.
In 2010, the consumer price index was at the same level as in 1992. The GDP index fell by 14% during this period. Even in 2014, property prices were still below their 1990 peak.
Initially, competition from neighbouring countries, the so-called “tiger economies” of Southeast Asia (Taiwan, Malaysia, South Korea), also made itself felt, but these countries soon found themselves in crisis mode themselves. Above all, however, the powerful upstart China emerged as a superior competitor in the Asia-Pacific region.
In Japan, it can be observed that the stagnation that has persisted since the 1990s is due to a sharp decline in the profitability of productive investment – more so than in any other G7 country. Successive governments have cut social benefits for senior citizens by 30% in real terms since 1995, and per capita spending on healthcare for the over-65s has been reduced by almost 20% in three decades. At the same time, corporate tax rates have been cut from 50% to 15%. While profits have risen from 8% to 16% of GDP, tax revenues have fallen from 4% to 2.5%. Instead of stimulating productive investment, companies hoarded capital or diverted it into government bonds and stock markets.
Chronic stagnation
Japan has long benefited from its lead in innovative consumer electronics and robotics. This lead has now been exhausted. Although Toyota has established itself as the world’s largest car manufacturer and the Sony Group has gained a dominant position in the music rights market, US media giants now occupy the key positions in the communications sector.
The island nation has a limited domestic economy (compared to the US, China and even the EU) and is therefore dependent on exports, especially to the US. The tariffs currently imposed by the US are hitting the economy hard, as other opportunities for expansion are significantly limited by China’s growing influence.
Japan’s track record is devastating for its economic ambitions: after annual growth of 8 to 10% until 1973, the economy has barely achieved zero growth since 2008.
It contracted in the first quarter of 2025, and trade figures point to a further decline in the second quarter, which means a technical recession. In the best-case scenario, Japan would grow by only 0.7% this year and 0.4% next year. Japan ranks last among the imperialist countries in terms of growth forecasts for 2026, which, according to the IMF, will fall by another two-tenths of a percentage point from an already low base of 0.7% to 0.5%.
According to the IMF’s assessment, Japan will need two decades of austerity measures to make up for the losses of the 2020s. Like all other imperialist countries, it is also plagued by enormous debt burdens, the interest costs of which eats up a large part of the public budget.
Political change
Seemingly unimpressed by the economic upheavals, the political landscape appeared to remain in harmonious cherry blossom stability for a long time.
The political system appears frozen because of the unbroken dominance the Liberal Democratic Party (LDP) since the 1950s. With only brief exceptions (1993–1994, 2009–2012), it has provided the head of government, either alone or in changing coalitions. In the exceptional periods, the LDP had to step down mainly because of corruption scandals involving leading politicians.
The party is characterised by its intertwining with the bureaucratic apparatus in the economy and the state. In terms of political orientation, it is most comparable to the FDP in Germany. Although it can claim to be a mass party, with a reported 1.1 million members, it cannot be described as a ‘people’s party’ because it does not represent different social forces. Rather, it has a nationalist wing and consists largely of careerists. The LDP is a conservative, arch-bourgeois party.
However, the current turning point in history, with its diverse and crisis-ridden challenges, is also knocking on Japan’s political doors. While its governments’ responses to economic deficits have been less than satisfactory, the struggle for the redistribution of the world presents the task of reallocating funds for massive increases in military spending. This is no easy task. Japan, too, will have no choice but to break with old habits.
As early as 2022, the country made a decisive change of direction, undermining the constitutional principle that Japan may only wage war in self-defence. The government drafted a new national security strategy that focuses on acquiring so-called counterstrike capabilities, in other words, arming itself with offensive weapons.
As the newly elected prime minister, Sanae Takaichi now seems to be the right person to steer this new course, which is reigniting the country’s ambitions to become a major power in the inter-imperialist competition. She comes from the right-wing nationalist ranks of the party. She describes herself as the ‘Iron Lady of Japan’ after her role model Margaret Thatcher, the British Prime Minister of the 1980s. Takaichi has found a suitable partner in the right-wing populist party Nippon Ishin no Kai (Japan Restoration Party), which guarantees her political freedom of action. She rails against migrants and wants to severely restrict the influx of foreign workers and tourists in order to curb alleged crime, and is calling for an upper limit, even though Japan is suffering from an ageing working population.
On the issue of rearmament, the new leader wants to go even further than the proposals in the security strategy paper and advocates expanding the navy’s field of operations. Her predecessors had already increased the defence budget. By 2027, it is set to reach US$66 billion, an increase of 65% compared to 2022.
She wants to roll back gender equality, for example in terms of naming rights, and advocates codifying patrilineal succession in the Japanese monarchy. She also wants to curb consumer prices, but has left open the means by which she intends to do that.
All these intentions, especially the increase in the military budget to over 2% of GDP, require further drastic cuts in social spending and working-class incomes.
Labour movement
The unionisation rate among wage earners is comparatively low at 16.1%. Traditionally, it is not organised by industry or occupation, but by company affiliation, which greatly hinders its ability to act and its reach. Although a nationwide coordinated campaign on wage negotiations is carried out in the spring, the negotiations are referred back to the company level, which devalues their solidarity and consequences.
The number of strikes in Japan fell to just 33 in 2022. The downward trend cannot be explained by the pandemic alone. In its current state, it is not possible to rely on an organised force to strike against anti-worker government measures. The trade union system urgently needs to be reorganised along the lines of strong industrial unions.
The reformist Socialist Party, which originally had strong ties to trade union associations after the Second World War, split in 1996, after briefly holding the post of prime minister in the Murayama cabinet, and renamed itself the Social Democratic Party. In the process, it lost a large number of its MPs to the Democratic Party, which has openly moved into the bourgeois camp. The more left-wing splinter group, the New Socialist Party – Peace League, has not had any parliamentary representation since 1998 and has no significant extra-parliamentary initiatives to show for itself. At the core of its programme is a commitment to demilitarised neutrality and openness to ecological issues. No impetus for opposition to the shift to the right is to be expected from this side.
Yet there are plenty of issues on which revolutionaries could campaign. The question of the militarisation of society has stirred up parts of society, especially young people, once before. In the run-up to the 1964 Olympic Games in Tokyo, nationwide mass protests against the arrival of a US nuclear submarine were violently suppressed.
More recently, the 2011 Fukushima nuclear disaster, for which the government and the operating company remain unpunished, led to demonstrations in Japan and other countries.
The fights against anti-migrant racism and against sexism must be linked to the social interests of the entire working class.
That, however, will need a political force that combines these issues within an overall strategy – a new workers‘ party in which revolutionary forces must intervene and fight for a revolutionary orientation.