Prime Minister Sanae Takaichi’s New Year Remarks Highlight Rising Costs and Yen Weakness, Focus on 2026 Economic Policies

Prime Minister Sanae Takaichi’s New Year Message

On January 1st, Prime Minister Sanae Takaichi released her New Year statement, expressing a strong sense of urgency about Japan’s serious economic challenges. Rising inflation and soaring housing prices are putting a strain on everyday life for many Japanese families. [1][3]

The Prime Minister described Japan’s declining population as a “quiet national emergency” and emphasized concerns over global instability. She reaffirmed her commitment to tackling inflation as a top priority. [1][3]

The Current Situation: Rising Costs and Living Challenges

Prices for New Year’s osechi dishes increased by 3.8% compared to last year, averaging around $2,900. A survey by Teikoku Data Bank shows that inflation is directly impacting household budgets. [3]

Despite the Bank of Japan’s interest rate hikes, the yen remains weak, leading to higher housing costs and increasing financial pressure on families. The economic hardship is becoming more acute. [1][3]

Key Strategies to Address Inflation

• Promoting Wage Growth: Supporting small and medium-sized businesses with a ¥1 trillion fund to encourage investment and growth. Expanding targeted regional grants to create a better environment for wage increases. [1]
• Addressing Yen Weakness: Finance Minister Satsuki Katayama signaled a firm stance against excessive yen depreciation on December 23rd. [3]

2026 Budget Overview

The draft budget for fiscal year 2026, approved by the Cabinet on December 26th, totals approximately ¥122.3 trillion ($1.1 trillion), making it one of the largest in Japan’s history. The new issuance of government bonds is expected to reach about ¥29.6 trillion. [3]

With the passage of the supplementary budget, Prime Minister Takaichi highlighted her commitment to fulfilling promises to the public and strengthening efforts to reduce economic inequality. [1]

Economic Outlook and Challenges

Japan’s economy in 2026 faces the twin challenges of overcoming inflation and sustaining long-term growth. Persistent cost-push inflation driven by labor shortages cannot be solved solely through tax cuts or stimulus payments. [2][5]

Experts recommend easing supply constraints and boosting productivity through investments in R&D, workforce development, and infrastructure. These are urgent priorities. [2]

While some analysts believe inflation will slow and consumer spending will stay resilient, wage increases will be key to maintaining economic stability. [4]

Role of Politicians

Yukio Noguchi, a distinguished professor at Hitotsubashi University, argues that Japan needs to shift away from short-term popularity-driven policies toward a growth strategy focused on expanding supply capacity. He sees 2026 as a pivotal year for Japan’s economic future. [2][5]

The Takaichi administration plans to continue emphasizing wage hikes and yen stabilization as core policies, moving toward the next phase of economic reform. [3]