"A Strong and Prosperous Japan"— Reading PM Takaichi's Policy Speech

On February 20, 2026, Prime Minister Sanae Takaichi delivered her policy speech at the opening of the 221st session of the National Diet. Having won the recent general election and formed a coalition government with Nippon Ishin no Kai (Japan Innovation Party), PM Takaichi used this occasion to launch her full policy agenda.

"A strong and prosperous Japan." Under this message, PM Takaichi presented six forms of national power: economic power, technological power, diplomatic power, defense power, intelligence power, and human capital. Over approximately 48 minutes, she laid out specific policies for each of these six pillars.

This article, while acknowledging the full scope of the speech, focuses on what I found most striking and essential. How will Japan confront the unprecedented threat of a China that no longer bothers to conceal its hegemonic ambitions? And the two pillars that underpin that confrontation: economic power and intelligence capability.

The full text of the speech is available on the Prime Minister's Office website (in Japanese).

Full text of PM Takaichi's Policy Speech at the 221st Diet Session

Confronting China's Naked Hegemonism

Our country must take the wheel itself, with a long-term perspective, and decide where we are headed. PM Takaichi opened the foreign affairs and security section with this declaration. Not reactive diplomacy, but Japan proactively charting its own course.

Behind this declaration lies China's brazen hegemonism. The speech explicitly stated that China has been intensifying attempts to change the status quo by force or coercion in the East China Sea and South China Sea and expanding and intensifying military activities around Japan. She also noted China's strengthening military cooperation with Russia.

The construction of military outposts in the South China Sea, routine territorial incursions in the East China Sea, military intimidation of Taiwan, and economic coercion of other nations. China's expansionist behavior, which seeks to rewrite the regional order by force, is reminiscent of pre-war imperialism — and in its scale and diversity of methods, arguably surpasses it.

Since taking office, PM Takaichi has maintained an unwavering stance against this threat. Since her remarks on a Taiwan contingency last year, she has faced fierce criticism from pro-China lawmakers and legacy media, yet her position has not wavered in the slightest.

In the speech, she did offer the diplomatic formality of comprehensively advancing the mutually beneficial relationship based on strategic interests and building a constructive and stable relationship with China. But what deserves attention is not the words — it is the policies. The creation of a "Japanese CFIUS" (Committee on Foreign Investment), restructuring supply chains to eliminate dependence on specific countries, support for undersea cable deployment, strengthening critical infrastructure systems, and considering restrictions on land acquisition by foreign nationals. Calm in language, resolute in policy. This is the hallmark of Takaichi diplomacy.

She positioned the Japan-U.S. alliance as "the cornerstone of foreign and security policy" and plans to strengthen ties with President Trump during her visit to Washington next month. Building on the tenth anniversary of the "Free and Open Indo-Pacific (FOIP)" concept advocated by former PM Abe, she stated she would "strategically evolve" these efforts. The phrase "a strong and prosperous Indo-Pacific" conveys a powerful intent to build a regional order that counters Chinese hegemony.

On defense, the speech outlined concrete measures including an accelerated revision of the National Security Strategy and related "three documents" within this year, reorganizing the Air Self-Defense Force into the "Air and Space Self-Defense Force," establishing a new "Space Operations Group," and revising the five categories of defense equipment transfers.

To make this confrontation with China truly effective, PM Takaichi presented two pillars: economic power and intelligence capability.

Pillar One: Economic Power — "Responsible Proactive Fiscal Policy"

To confront China, Japan itself must first become strong. The foundation for this is what the speech positioned as its centerpiece: "responsible proactive fiscal policy."

PM Takaichi declared she would break the long-standing trend of excessive fiscal austerity and underinvestment in the future. Investment rests on two pillars: "crisis management investment" to minimize risks in areas like economic security, energy security, and national resilience, and "growth investment" in advanced technology sectors such as AI, semiconductors, and shipbuilding.

These two types of investment are closely tied to the China strategy. Crisis management investment advances decoupling from economic dependence on China, while growth investment secures Japan's technological edge. In an era of global competition in industrial policy, the argument that we should not hesitate to deploy fiscal resources where necessary stems from PM Takaichi's realist approach of treating security and economics as inseparable.

She also plans to fundamentally reform budget formulation. She will break with the practice of budget formulation that assumes supplementary budgets every year and allocate necessary funding in the initial budget. Crisis management and growth investments will be managed under a "multi-year, separate-track framework." This is a major reform spanning roughly two years.

She also stated that this does not mean adopting reckless fiscal policy, explicitly setting a fiscal discipline that caps the growth rate of outstanding debt within the economic growth rate.

What is particularly noteworthy is that this policy is already being implemented. The government has issued deficit bonds, reduced gasoline and diesel prices by abolishing provisional tax rates, and provided support for electricity and gas bills. This "walking the talk" approach gives the speech real credibility.

A strong economy directly improves the lives of citizens. The so-called "1.03 million yen wall" will be raised to 1.78 million yen, and the government is accelerating consideration of a zero consumption tax rate on food and beverages for a two-year period. When citizens prosper, the nation's underlying strength grows. This virtuous cycle is the essence of "responsible proactive fiscal policy."

We will keep pushing the growth switch — push, push, push, and push it to the limit. This powerful declaration encapsulates the determination behind the economic policy agenda.

Pillar Two: Intelligence — Establishing the National Intelligence Council

Elevating "intelligence capability" as an independent pillar in a policy speech is unprecedented among Japanese prime ministers.

A "National Intelligence Council" chaired by the Prime Minister will be established within the Cabinet, and the Cabinet Intelligence and Research Office will be upgraded to a "National Intelligence Bureau." This consolidates intelligence functions previously scattered across various ministries into a unified system for sound decision-making.

She further stated that she would advance institutional design to prevent improper interference from foreign countries. This can be read as laying the groundwork for legislation akin to an anti-espionage law — a highly significant statement.

Predictably, naive liberal voices will raise alarm, crying "this leads to a surveillance society" and "expanding government power is dangerous." However, given the reality of China's actions described above, failing to build an intelligence infrastructure is the true risk for the people of Japan. The intelligence systems that major democracies like the United States, the United Kingdom, and France maintain as a matter of course — Japan is finally on the verge of establishing one in earnest. If anything, it is long overdue.

Strengthening the national foundation through economic power and accurately assessing threats through intelligence capability. Only with these two pillars can Japan's foreign and defense policies for confronting Chinese hegemonism have real teeth.

Failures of China-Accommodating Cabinets

PM Takaichi's "responsible proactive fiscal policy" and resolute stance toward China represent a clear antithesis to three decades of policy failures. Following the 1985 Plaza Accord, the yen surged and Japan's economy fell into prolonged stagnation after the bubble burst. Throughout this period, successive cabinets that took an accommodating stance toward China committed critical errors in both economic and China-related diplomacy.

First, let us examine the trajectory of nominal GDP among major developed nations. We compare relative indices with 1985 — the year of the Plaza Accord — set to 100. All figures are in local currency terms¹.

The facts shown in the chart are stark. Japan, which was on roughly the same growth trajectory as other nations until 1990, was completely left behind after the bubble burst. As of 2025, Germany has grown approximately 4.5 times and France approximately 4 times compared to 1985, while Japan has managed only 1.9 times.

While the causes of economic stagnation are complex — including the bubble burst and the global financial crisis — it cannot be overlooked that throughout this era of decline, successive China-accommodating cabinets committed critical diplomatic errors. A vicious cycle took hold: a weak economy made it impossible to stand firm against China, and deference to China further constrained the economy.

Looking back, economic weakening and China accommodation advanced in lockstep. A weak economy made it impossible to push back against China. Deference to China further constrained the economy. What PM Takaichi is trying to break with "responsible proactive fiscal policy" and "strengthening intelligence capability" is precisely this vicious cycle.

Assessing the Speech

This policy speech stands out even compared to those of previous prime ministers.

First, consistency in China policy. Despite facing criticism from media and pro-China lawmakers since her Taiwan contingency remarks last year, she has steadily built up substantive countermeasures: strengthening economic security, creating a Japanese CFIUS, restructuring supply chains, and establishing the National Intelligence Council. The speech combines diplomatic niceties with resolute policy substance. This balance of composure and resolve deserves high praise.

Second, actions backing the words. "Responsible proactive fiscal policy" is not mere rhetoric. Deficit bonds have been issued, provisional tax rates abolished, and cost-of-living support implemented. The bold declaration of fundamentally reforming the budget process reflects confidence built on results.

Third, policy coherence. The framework of strengthening national power through economic power and intelligence capability against the clear threat of China powerfully communicates the administration's direction.

Of course, challenges remain. Can "responsible proactive fiscal policy" coexist with fiscal discipline? Will investment across 17 strategic sectors function effectively? The hurdles are far from low.

Yet, as the closing words suggest — A nation that does not take on challenges has no future. Politics that only defends cannot create hope — this speech carries an unmistakable will to reject the status quo. It is a policy speech that conveys the determination to chart Japan's own course and act on it.