Following a significant electoral victory that solidified her government, Prime Minister Sanae Takaichi is tasked with advancing several pivotal policies, particularly concerning the initial budget plan for the upcoming fiscal year and managing Japan's complicated diplomatic relations with both the United States and China. Her agenda includes ambitious items such as a proposed consumption tax exemption on food products for two years and constitutional amendments, which poses both opportunities and challenges for her administration, especially regarding how these initiatives are perceived by the financial markets.

A major point of contention is Takaichi's declaration of 'responsible active fiscal policy.' Despite her intentions to stimulate the economy, there have been concerns regarding the potential for increased long-term interest rates and a decline in the yen's value if markets do not trust her approach. Her push for a two-year zero consumption tax on food will undergo discussions within a bipartisan 'National Conference,' although the promise doesn't seem firm in the ruling party's pledges, indicating a complex legislative process ahead. Ultimately, there are fears that even with tax reductions, the fiscal implications might not be manageable, particularly concerning necessary funding sources.

The ruling party has also introduced concepts such as 'crisis management investments' and strategic growth investments, targeting sectors like AI, semiconductors, and space exploration. The effectiveness of these investments in boosting economic growth is uncertain, leading to skepticism about the government’s ability to make informed decisions about where and how to direct funds. With the need to pass a substantial budget by March and diminished majority control in the upper house, the government's ability to maneuver through these political complexities remains in question.