Policy Speech by Prime Minister TAKAICHI Sanae to the 222nd Session of the Diet

The international order is currently undergoing a massive transformation. Countries are competing with one another through enormous, long-term industrial policies, while their competition for advanced technologies, human resources, and investment is now intensifying to an unprecedented degree.

That is precisely why Japan must now rise to this challenge. We will fully defend a rules-based, free and open international order and boldly advance strategic investments that enhance resilience against potential crises, which the Government will implement preemptively to address globally shared risks and issues, as well as investments that promote growth that will help carve out Japan's future. Moreover, Japan will robustly realize sustained economic growth.

This is the origin of my ambition to become prime minister.

As the old saying goes, "The truly determined will succeed in their pursuits."

I hold an unwavering belief in the latent power of Japan and the Japanese people. Setting forth our determination, we will carry out actions one after the other, never fearing challenges. As long as we hold that resolve, Japan will absolutely be able to carve out a new path forward, no matter how wildly the times change. That is my firm belief.

I am fully prepared to stand at the fore as I shoulder the responsibilities of national administration.

The aspiration I follow is, to quote the Chinese classics again, "governing the nation and bringing aid to the people."

The highest priority of the Government is to leverage the power of the economy to safeguard the daily lives of the Japanese people and carve out a hopeful future.

I will build a Japan in which everyone can feel hopeful about the future, including people with jobs, families with small children, the elderly, and people living in areas outside our major urban centers.

Under a deflationary economic structure and low interest rates that lasted for nearly 30 years, Japan experienced an era in which even if one worked, wages remained stubbornly fixed.

Additionally, from our experience with long-standing stagnation, a sense of unease toward the future caused businesses and households alike to refrain from investing in the future, hesitate to pass higher costs through to product prices, shy away from increasing workers' wages, and hold back on consumption. That defensive stance then spread in society.

However, currently, economic policies implemented until now and companies' efforts to raise wages are bearing fruit, and there is no doubt that the tide is beginning to turn. In the annual wage bargaining negotiations held each spring, we achieved wage hikes in the five-percent range for the third year running, and domestic capital investment by private-sector companies for fiscal year 2025 reached 128 trillion yen, the highest level ever.

The Japanese economy is now at a crossroads, where the question is whether it can step onto the path of a virtuous cycle of growth, where companies make investments, wages rise, and consumption expands.

The question before us is whether we allow these signs of change to end as a temporary phenomenon or whether we develop them into a sustained virtuous cycle of growth.

Against a backdrop of countries around the world uniting as nations to engage in long-term, large-scale industrial policy competition, if Japan alone comes to a standstill, companies, employment, and investment would all flow overseas, while domestically Japan might revert back to that era of stagnation.

The Takaichi Cabinet, through its approach of responsible and proactive public finances, will induce domestic investment, raise Japan's potential growth rate, increase good employment opportunities and incomes, improve consumer sentiment, and realize a virtuous cycle under expanding gross domestic product (GDP), in which business profits rise and tax revenues increase naturally.

By bringing this virtuous cycle into being, we will be able to turn people's unease into hope for the future, with people willing to consume now that they expect their salaries to rise, people willing to invest because they expect corporate track records to improve, and people willing to take on new challenges.

Without growth, wage increases will come to an end.

Without growth, rising tax revenues will also cease.

Without growth, enhancements to social security will also stop.

This does not mean that the Government will simply begin to increase its spending. It instead means we will embark on new economic and fiscal management that will achieve a strong economy together with fiscal sustainability without putting off necessary policies or reforms.

We will ensure fiscal sustainability even as we increase people's take-home pay and bring prosperity to people's daily lives. Achieving both of these simultaneously is exactly what is meant by "responsible and proactive public finances."The first year for responsible and proactive public finances has truly now just begun.

Taking Japan’s Growth Strategy and our Strategy for the Future of Regions as our two key approaches, we will boldly review our budget formulation policy. To serve as a catalyst for private-sector investment, the Government, taking the initiative to act first, will provide large-scale, long-term fiscal outlays having a high degree of predictability in a deliberate manner, which will powerfully induce bold domestic investments.

We will break away from dependency on supplementary budgets, funding permanent programs through the initial budget.

We will establish the "Strong and Prosperous Japan" Investment Framework, targeting measures that significantly increase domestic private-sector capital investment or the potential growth rate. This Investment Framework will not impose ceilings on budget requests and will, as a general rule, focus on initiatives whose plans extend across multiple fiscal years, in order to overcome the constraints of precedents and ensure we do not close any doors on new proposals before they are even considered.

For fields that are particularly significant in terms of economic security, we will secure adequate funding over multiple fiscal years and moreover manage such funding separately, within special accounts.

In order to ensure the appropriateness of special tax measures, subsidies, and other such expenditures, we have newly established a department within the Cabinet Secretariat, a so-called Japanese version of the U.S. Department of Government Efficiency (DOGE). We will redouble the efforts being taken by this department and put them into tangible form. We will perform thoroughgoing reviews of tax breaks, subsidies, and funds, reconsider our priorities from the very beginning, and focus our resources on the areas we deem most important.

The sustainability of public finances is a natural prerequisite for moving forward with responsible and proactive public finances. As laid out within Basic Policy on Economic and Fiscal Management and Reform 2026, we have positioned the steady reduction of the national and local debt-to-GDP ratio as a core priority and will manage Japan's primary balance over the multiple fiscal years, rather than individual fiscal years.

Taking into consideration the effects of economic growth, we will appropriately control the total amount of government bonds issued throughout the year while comprehensively monitoring the economy, prices, tax revenue, interest rates, the cost of servicing debt, market conditions, and other factors.

If the economy or the markets indicate movements different from expectations, we will competently analyze the impact and take necessary responses in a flexible way. We will implement our policies steadily, build up a history of reliable results one after the other, and provide careful explanations of the contents to the Japanese people as well as to market stakeholders, both domestically and abroad. The Takaichi Cabinet will increase markets' confidence in the Government through its straightforward approach.

As for our strategic investments that enhance resilience against potential crises and our growth investments, within our 17 strategic fields and 62 key products and technologies, we will fine-tune the Public-Private Investment Roadmap, focusing on key priority areas in terms of existing sources of revenue, future major revenue drivers, and the strengthening of economic security. By the end of 2026, we will also formulate an Action Plan for Japan's Growth Strategy, which will clearly map out a course for domestic investment over the next five years.

This Action Plan will incorporate comprehensive support measures that address the eight cross-cutting issues we have identified, including materializing a smooth supply of human resources and funding to growth sectors, which is a prerequisite when promoting public- and private-sector investment; strengthening the ways of cultivating human resources and reforming high schools and higher education; accelerating the rollout into society of technologies owned by startups; providing assistance to small- and medium-sized enterprises and small-scale business operators for labor-saving investments and improvements in productivity; thoroughly ensuring companies' ability to pass higher costs through to product prices and ensuring proper business transactions; and preparing environments that are conducive to raising wages by promoting mergers and acquisitions and business succession

At the same time, adopting a mindset focused on reform, we will bring about bold regulatory reforms in order to promote private investment and technological innovation.

This Action Plan will clearly set forth the targets to be attained, the specific content and timing, the nature of the national-level assistance available, the necessary budgetary amounts, the roles of the national government and the private sector, and the expected outcomes, all spanning multiple fiscal years. Likewise, it will lay out distinct steps for forging winning strategies, based on the investments, sales, technology development strategies, and other factors of projects receiving support.

While we will not postpone any necessary investments, at the same time, we will on a continual basis verify the cost-effectiveness of investments and conduct reviews, so that we do not continue aimlessly funding projects that generate only meager results.

With the situation in the Middle East growing increasingly tense, natural disasters intensifying in severity, and AI and other technological innovation developing rapidly, Japan now faces an era of unprecedented changes and risks. We will advance our strategic investments that enhance resilience against potential crises across the entire spectrum of fields, including security in energy and resources, food security, health and medical care security, cyber security, disaster prevention, the ocean, and space.

We will also connect the products, services, and infrastructure emerging from that domestic investment to new high-growth markets around the world. For example, we will further accelerate the GX initiatives that Japan has pioneered ahead of the rest of the world along the two pillars of strengthening energy security by diversifying supply sources of fossil fuels and reducing risks, and expanding investment toward energy transition, greater supply capacity, and enhanced efficiency.

We will leverage efforts such as these to ensure a sufficient and stable supply of electricity that is able to respond to the growing electricity demands from data centers accompanying progress in the societal rollout of AI.

In addition, making use of the Asia Zero Emission Community (AZEC) framework, we will promote the overseas market expansion of Japanese products, services, and infrastructure that contribute to decarbonization and the attainment of energy security, which are challenges faced in common around the world.

We will vigorously promote this as the Comprehensive Package for Strengthening Energy Supply and Demand Structure (also known as the "Policy Package for Wide Energy and Resources Resilience through GX," or "POWERR GX"), and before the end of 2026, we will compile a new strategy that incorporates systems and the budget in a comprehensive manner.

First of all, we will establish a system designed to fundamentally strengthen Japan's energy procurement systems and networks by thoroughly diversifying our supply sources and spreading risk, including by reducing our dependence on specific supply routes for crude oil and other resources.

With regard to growth investments in areas such as AI, semiconductors, quantum technology, the content industry, and fusion energy, where industrial policy competition among countries is intensifying, we will attract domestic investment and human resources through the use of bold measures to promote investment, thereby further enhancing Japan's international competitiveness.

Japan has technologies that rank among the very best in the world.

"Win through technology to triumph in business as well."

We will move forward in an integrated manner from research and development to the implementation of technologies in real-life situations. By doing so, we will enable Japanese technology to blossom on the world stage.

We will improve autonomy through technologies and also create indispensability through technologies. This is a growth strategy, and at the same time, a security strategy.

In Kumamoto Prefecture, using TSMC's expansion as a springboard, the agglomeration of semiconductor-related companies is now underway, resulting in new employment, income, and technology investments emerging one after the other. The head of a world-leading memory semiconductor company has also reported that we can expect tax payments to dramatically exceed the cumulative amount of support provided by the Government of Japan.

Measures to promote investment through public-private cooperation will bear fruit, and investments in the future are starting to deliver tangible results that also generate higher tax revenues.

Japan's Growth Strategy is by no means something only for a select few cities or only for major corporations. Japan's significant growth potential is found in the areas outside our major urban centers.

The Takaichi Cabinet will support the formation of industrial clusters that harness the distinctive strengths of our local areas, including agricultural, forestry, and fishery products.

We will pursue our Strategy for the Future of Regions through three types of plans: Strategic Industrial Cluster Plans, which lay out wide-area industrial cluster plans which have their start in large-scale investments by companies related to the 17 strategic fields; Regional Industrial Cluster Plans, in which the prefectures and municipalities lay out plans for utilizing and developing local resources and forming industrial clusters; and Local Industry Growth Plans. Under this Strategy, more than 50 such Plans have already been set into motion.

Behind the scenes, we are moving forward with several hundred ideas taking shape in communities all around the country, and by the end of 2026 we will double the number of these Plans drawn up and publicly announced.

Some local governments have indicated that under the framework in place until recently, they were unable to obtain adequate assistance from the national government toward infrastructure development, investment support, and other elements necessary for realizing the industrial clusters the local governments imagined. Mindful of that, we will draw up an Implementation Framework for the Strategy for the Future of Regions that clearly lays out the approach for providing support over the next five years, including introducing additional measures such as infrastructure development and investment support at the national level to facilitate the materialization of Industrial Cluster Plans originating in local areas.

We will draw upon this Implementation Framework to smooth the way for the compilation of even more ambitious Plans in 2027 and beyond.

By next spring, we will release a Domestic Investment Map that highlights projects all throughout the Japanese archipelago that are coming into realization through national-level support, including those newly set into motion as a result of the Strategy for the Future of Regions.

Our local governments are brimming with enthusiasm and a readiness to take on challenges, with the aim of changing the landscape of our local regions entirely. With the national and local governments working arm-in-arm as a single unit in support of that passion, let us bring industrial clusters fully into bloom in every corner of the Japanese archipelago.

It will be essential for us to mobilize domestic investment, raise Japan's potential growth rate, and continue to increase wages at a pace that keeps up with or outstrips the rise in prices. That said, a certain amount of time will be needed for a continued upward climb in real wages to become established in society. That is why the Takaichi Cabinet has been working to tackle rising prices as its highest priority ever since it was first inaugurated.

We have taken seamless measures to counter rising prices, including by abolishing the provisional tax rates on gasoline and on the delivery of diesel oil and, in response to the situation in the Middle East, by providing fuel oil subsidies and assistance for electricity and natural gas bills.

There are many measures rooted in our grants to local regions for prioritized assistance that will be implemented by local governments going forward, and we will also lighten people's income tax burden during the year-end tax adjustment for 2026.

These policies have had an impact, with Japan’s rate of price increases at the lowest level of all G7 countries.

Wage growth has also surpassed the rise in prices. Our rate of increase in real wages has remained positive for eight consecutive months and stands at the highest level in the G7.

Moreover, we are pushing forward in preparing the draft Consumption Tax and Working Individuals’ Burden Relief Support Benefit Legislation, which will provide seamless measures to address rising prices and also directly lessen the financial burdens now on the shoulders of low- and middle-income earners.

We want to generate at least a little "breathing room" in people's household budgets by reducing the burden of the tax on food and beverages, the items that are closest to people in their daily lives, while also establishing measures that provide relief support benefits that vary according to income. That is what this bill aims to achieve.

This bill considers tax and social insurance burdens and cash benefits in a comprehensive manner and paves the way for well-tailored assistance that is well-matched to income and other factors. There were many points on which we share a common understanding with the political parties participating in the National Council for Social Security regarding the bill's overall direction of aiming to ease people's financial strain at an early time.

I am aware that reducing the consumption tax rate has since the beginning featured prominently in statements made by members of the opposition parties over the years.

To earn the confidence of the market, we will secure the necessary funds without relying on the issuance of deficit-financing bonds, so there is no need for concern about securing financial resources.

With all our efforts devoted to "governing the nation and bringing aid to the people," let us walk forward together.

The International Horticultural Expo 2027, Yokohama, Japan (GREEN×EXPO 2027) is an ideal opportunity to convey Japan's charms and points of appeal to the international community. We will convey to the world of course the allure of flowers and greenery as well as food and agriculture, but also Japan's outstanding domestic technologies that will contribute to resolving issues in the global environment, including decarbonization efforts.

Population decline is a national crisis that is quietly unfolding. We must reverse the tide of the declining birthrate while forging a new shape for the nation that adapts to a society experiencing population decline. We aim to draw up a Comprehensive Strategy on Population by the end of 2026 and set out simulations of future demographic changes alongside an overall image of our response measures. After that, we will advance our examination of policies and programs in a cross-sectoral manner.

We will also press forward in considering our fundamental stance on the acceptance of foreign nationals.

Labor shortages are the greatest challenge faced by societies with declining populations. We will boldly deploy AX (AI transformation) in society in order to protect essential services, including medical and nursing care, physical distribution, and public transportation, and respond to the expansion of domestic investment.

In order to build a society with widespread benefits from AX and DX (digital transformation), we will strengthen the Government's central policy coordinating function and break down bureaucratic sectionalism while vigorously advancing both public- and private-sector policies and efforts to build a digital society by promoting the development of AI and using it extensively.

Today, as inter-state tensions, including those in the Middle East, grow increasingly complex and become the norm, the free, open, and stable international order that we have long known and valued is being greatly shaken.

Attempts to change the status quo by force must never be tolerated anywhere in the world. Japan will continue to champion this principle on the global stage.

Japan has consistently supported various international courts, including the International Court of Justice (ICJ), the International Criminal Court (ICC), and the International Tribunal for the Law of the Sea (ITLOS), and has contributed judges to these institutions.

In keeping with this position, we will continue to underscore the importance of the rule of law and work to uphold and reinforce an international order based on the rule of law by playing a more active role in the peaceful resolution of conflicts, including through efforts to mediate peace.

We will further update the Free and Open Indo-Pacific (FOIP), strengthen cooperation with our allies and like-minded partners, and work together with countries across the region to make the Indo-Pacific a region endowed with greater autonomy and resilience, where countries can grow stronger and more prosperous together.

The Partnership on Wide Energy and Resources Resilience Asia (POWERR Asia) is one example of such concrete efforts.

We will advance cooperation in areas such as stockpiling capacity development and credit provision, while enhancing collaboration between oil-producing and oil-consuming countries, thereby supporting energy security and economic growth across Asia.

The Japan-U.S. Alliance is the cornerstone of Japan's diplomacy and security. We will further reinforce its deterrence and response capabilities and elevate the Alliance to new heights.

The smooth stationing of U.S. forces in Japan will only be possible by gaining the understanding and support of the Japanese people, including the local communities. We will continue our efforts to mitigate the impact of U.S. military bases, notably in Okinawa. With the aim of achieving the total return of Marine Corps Air Station Futenma as early as possible, we will proceed with the construction to enable the relocation to Henoko. We will also make use of the “Strategy for the Future of Regions” framework to realize a strong and dynamic Okinawan economy.

With the Republic of Korea, an important neighbor with which we have deepened communication through shuttle diplomacy, we will further strengthen our relationship across a wide range of areas, such as security and the economy, including through the Japan-U.S.-ROK trilateral framework.

We will further deepen our cooperation with ASEAN countries.

Furthermore, we will strengthen our relations with the Global South, including India, the Middle East, Africa, and Latin America and the Caribbean, thereby expanding Japan's strategic options and enhancing our presence in an increasingly multipolar world.

China is an important neighbor, and despite challenges in our relationship, ties between our two countries have been built up over many years. Against this backdrop, we will comprehensively advance a Mutually Beneficial Relationship Based on Common Strategic Interests. At the same time, with regard to various issues in the East and South China Seas, military activities around Japan, coercive measures, the safety of Japanese nationals, and human rights concerns, we will clearly assert Japan's positions where they need to be asserted, and strongly urge China to act responsibly. At the same time, we will maintain communication about common challenges, promote dialogue to protect Japan's national interests, and work to build a constructive and stable Japan-China relationship.

The issue of abductions by North Korea is an ongoing humanitarian issue, and we will work toward a resolution at the earliest possible date, pursuing every possible course of action, including the possibility of a summit meeting, without ruling out any options. North Korea's nuclear and missile development is totally unacceptable.

The Northern Territories are inherent territories of Japan, both historically and under international law. Although our relations with Russia, which continues its aggression against Ukraine, remain in a difficult situation, we remain committed to the policy of resolving the territorial issue and concluding a peace treaty.

Japan's security environment is changing at an accelerating pace and becoming increasingly complex and severe.

To fundamentally reinforce our defense capabilities, we will review the Three Strategic Documents by the end of 2026. We will also work to improve the treatment and working conditions of Self-Defense Forces (SDF) personnel and strengthen support for retired SDF personnel and their families.

Through the National Intelligence Council and the National Intelligence Bureau established this year, we will strengthen our collection, integration, and analysis of information across ministries and agencies, while advancing consideration of further measures to enhance our intelligence capabilities that underpin national decision-making.

From a national security perspective, we will make regulations governing the transfer of land ownership and other transactions involving land in designated areas, including areas surrounding defense facilities and areas of border islands. In addition, to address money laundering and economic security concerns, we will work to introduce a registration system for information on the beneficial owners of legal entities.

Peace is not something that can be achieved simply by wishing for it. The Takaichi administration will continue to make sustained diplomatic efforts for peace and stability while steadily reinforcing our defense capabilities, and will resolutely protect the lives and assets of the Japanese people, as well as Japan's territory, territorial waters, and territorial airspace.

I offer my deepest condolences to those who lost their lives in disasters, including the 2026 Kumamoto Earthquake and the torrential rains. I also extend my heartfelt sympathies to all those affected by these disasters and express my profound gratitude and respect to everyone who has been working tirelessly toward recovery and reconstruction.

For Japan, a country frequently struck by natural disasters, enhancing resilience against disasters is indispensable for protecting the lives and livelihoods of the people as well as for safeguarding economic activities. To this end, the Disaster Management Agency will be established this November. We will establish a structure that will serve as the command center for disaster response, shouldering all responsibilities from end to end in an integrated manner, covering everything from preparations before a disaster strikes, including disaster preparedness and preventive maintenance, to the initial response in the immediate wake of a disaster, including rescue operations and the restoration of infrastructure, to setting up evacuation shelters, providing supplies, and undertaking recovery and reconstruction. In this way, we will conduct disaster management administration seamlessly from beginning to end.

The Government will continue to support areas struck by disasters, including those affected by the Noto Peninsula Earthquake and the Kumamoto Earthquake, with a strong sense of responsibility until the day comes when the people in those areas can truly feel that reconstruction has been achieved. As we work toward reconstruction from the Kumamoto Earthquake, we will devote our utmost efforts to supporting the rebuilding of the lives and livelihoods of those affected by the disaster, based on the package of measures compiled in August.

To prevent casualties caused by torrential rains and other disasters before they occur, we will swiftly implement effective disaster prevention measures, including measures to prevent vehicles from entering flooded underpasses.

We will further bolster Japan's world-leading knowledge and expertise in disaster prevention, disaster recovery, and reconstruction as one part of our strategic investments that enhance resilience against potential crises. Japan will also advance its international cooperation in disaster management.

“Without the reconstruction of Fukushima, there will be no reconstruction of Tohoku. Without the reconstruction of Tohoku, there will be no revitalization of Japan.”

We will never forget this fundamental principle. We will work to rebuild the lives and livelihoods of those affected by disasters and strengthen industrial competitiveness, including by promoting the Fukushima Innovation Coast Framework.

At the same time, to ensure the continuity of the capital's core functions, we will work to ensure the smooth implementation of the Secondary Capital Act.

Furthermore, to prevent people from falling victim to malicious crimes committed by so-called “Tokuryu,” or anonymous and fluid criminal groups and other groups that threaten to harm people in their daily lives, we will review the relevant systems so that, in the execution of police duties, measures can be taken to prevent harm from serious crimes, including by enabling the police to deal with highly anonymous and confidential communication apps.

We will also accelerate initiatives based on the Roadmap for Bear Countermeasures compiled this year.

I welcome the significant progress made during the previous Diet session in preparing an environment in which the Japanese people, with whom sovereign power resides, can make their judgment on constitutional reform, through the amendment of the National Referendum Act. Going forward, I strongly hope that constructive and vigorous discussions transcending party lines will take place in the Commissions on the Constitution.

I also hope that thorough discussions will be held on reducing the number of seats in the House of Representatives, with a view to realizing this during the current Diet session.

"The truly determined will succeed in their pursuits."

The Takaichi Cabinet will remain steadfast in its aspiration to leverage the power of the economy to safeguard the daily lives of the Japanese people and carve out a hopeful future. We will never turn our eyes away from the changes of the times; we will make the necessary policy decisions without hesitation and boldly take on challenges.

And once we make a decision, we will not stop there, but instead see it through.

We will turn challenges into policies and policies into results. And until those results reach every corner of the country, we will take responsibility for putting them into action.

“Making the Japanese archipelago stronger and more prosperous.”

We will build a country where vibrant economic activity reaches every corner of the Japanese archipelago, where each and every person can live in safety and with peace of mind, and where everyone can move forward with hope.

We will pass on to the next generation a Japan that is stronger and more prosperous, and one we can be proud of. We will never stop moving forward in pursuit of that mission.

“Decision, challenge, and action.” “Decision, challenge, and action.”

We will continue to deliver solid results that the Japanese people can feel for themselves.

Thank you very much for your kind attention.