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Published on: 02/09/2026 - 10:32

Large electoral victory, stock market euphoria and promises of massive recovery: the new Japanese Prime Minister Sanae Takaichi begins her mandate to the applause of the markets. But behind the enthusiasm, a question remains: how far can Japan increase its debt?

Euphoria was immediate on the Japanese markets. The Nikkei 225 jumped almost 4% at the close this Monday, even crossing the symbolic threshold of 57,000 points for the first time during the session. A clear vote of confidence after the overwhelming victory of Sanae Takaichi, who won two-thirds of the seats in the Lower House.

Financial risk in ambush

Coming from the right wing of the Liberal Democratic Party, the Prime Minister claims the legacy of Shinzo Abe and his “Abenomics”. Stated objective: support purchasing power, cushion the shock of inflation and revive growth through public spending. On the menu: targeted tax cuts, household aid, temporary suspension of taxes on certain food products, massive investments in tech, AI, energy and defense.

But this strategy is based on a risky bet: a public debt of 230% of GDP, the highest in the developed world. Until now sustainable thanks to a debt largely held by national actors, it is becoming more fragile with the return of inflation and the rise in rates from the Bank of Japan. A delicate balance that the markets could test more harshly in the months to come.

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