Introduction: The Theoretical Framework and Context of Comprehensive National Power Reconstruction
The policy system advocated by former Liberal Democratic Party President and current Prime Minister Sanae Takaichi is systematically presented in her edited work, Kokuryoku Kenkyu: Nihon Retto o Tsuyoku Yutaka ni (National Power Study: Making the Japanese Archipelago Strong and Prosperous). This work is not merely a political manifesto; it is a complete set of the “Comprehensive National Power Theory,” attempting to integrate six key elements: diplomacy, defense, economy, technology, intelligence, and human capital. This strategic blueprint is designed to help Japan escape the “Lost Decades” and respond to escalating international geopolitical conflicts (especially the Sino-US competition and Indo-Pacific security challenges) by providing national-level, top-down design.
The two cornerstones of Takaichi’s policy—”Responsible Active Fiscal Policy” and “Autonomous and Assertive Conservative Security”—signify a shift in Japan’s national strategy from the traditional “light-armed, heavy-economy” approach to one that seeks both “Strength” (security) and “Prosperity” (economic growth). This article will deeply analyze the mechanisms and practical application of the four core elements of national power and evaluate the critical challenges they face regarding fiscal sustainability and social equity.
Ⅰ. The Two Pillars of National Power: The Strategic Coupling of Economy and Defense
Takaichi’s theory of national power does not view the economy and defense as mutually exclusive domains but emphasizes their “coupling,” asserting that they must support each other.
1. Economic Power: Sanaenomics and Strategic Industrial Policy
Takaichi’s economic vision is an upgraded version, inheriting and reinforcing the foundation of the “Three Arrows” of Abenomics, emphasizing the government’s essential role in driving a “high-pressure economy” at critical junctures.
• The Philosophy of Active Fiscal Policy: She firmly believes that in the current environment where nominal growth is below long-term interest rates, expansionary fiscal policy is the only way to escape deflation and increase potential growth. She defines this as “responsible” because she commits to gradually reducing the net government debt-to-GDP ratio through economic expansion.
• The Dual Purpose of Strategic Investment: Resources are concentrated into two types of investment—”crisis management investment” (reinforcing infrastructure, energy resilience) and “growth investment” (cutting-edge technology R&D). This is not just for economic efficiency but primarily to ensure “economic security.” Investment in sectors like semiconductors, AI, and quantum technology aims to rebuild autonomy and resilience in critical supply chains.
• Tax Reform and Demand Stimulation: The policy advocates significant tax relief for citizens to stimulate domestic demand, including the early abolition of the temporary gasoline tax rate and the increase of the basic income tax deduction. Furthermore, she uniquely proposes examining a tax system to support loss-making companies that raise employee wages, aiming to fundamentally push the Japanese economy into a virtuous cycle driven by demand-led growth.
2. Defense Power: Beyond Traditional Deterrence and New Domain Capability Building
In the realm of defense, Takaichi’s policy reflects a high sense of crisis regarding geopolitical risks, urging a thorough military transformation.
• Breakthrough Growth in Defense Budget: She proposes that the defense budget should reach the “¥10 trillion level” and supports raising defense spending to over 2% of GDP. This figure marks a fundamental break from Japan’s long-standing post-war political convention of keeping defense spending around 1% of GDP.
• Shift in Capability Focus: The emphasis of funding is shifting from traditional equipment procurement to R&D and deployment for “new domain warfare,” including Space, Cyber, and Electromagnetic capabilities—the core elements of future asymmetric warfare.
• Strengthening Deterrence: Expert advice included in the book focuses on enhancing the Self-Defense Forces’ (SDF) actual operational capabilities and acquiring Counter-Strike Capability. This aims to move Japan beyond a purely passive defense posture toward a stronger deterrent stance against potential threats.
Ⅱ. The Long-Term Foundation of National Power: Endogenous Drivers of Technology and Human Capital
Long-term national competitiveness is ultimately determined by the quality of human capital and technological innovation capability. Takaichi’s policy aims to find a synthesis between history and the contemporary context.
1. Technological Power: Reviving the Spirit of “Shokusan Kōgyō” and Economic Securitization
Takaichi views technological power as a dual safeguard for national security and economic prosperity, arguing that the state must once again become a powerful driver of innovation and industrial development.
• Historical Reference and Contemporary Risk: She calls for learning from the Meiji era’s “Shokusan Kōgyō” (Encouraging Industry) spirit, advocating that the government should lead and concentrate resources on strategic industries. However, in the modern context, such industrial policy also carries the risk of “whether the government can pick winners.”
• Energy Autonomy: In energy security, the policy emphasizes independent R&D of domestic energy technology. For instance, expressing concern over the high market share of foreign-made solar panels, she advocates replacing imported products with domestically developed technologies like Perovskite solar cells. This is a typical strategy combining technological innovation with economic security considerations.
• The Comprehensive Meaning of Space Policy: By dedicating a separate section to “Space Policy,” emphasizing its integrated nature encompassing intelligence, technology, and defense, she demonstrates a commitment to future high-frontier strategy.
2. Human Capital: Educational Reform and Professionalization of the Civil Service
Takaichi defines “Human Capital” as the most fundamental and critical “endogenous driver” among all elements of national power.
• Professionalization of the Education System: To support the development of cutting-edge technology, STEM education and relevant professional training must be strengthened. The policy indirectly advocates cultivating professionals through the education system who can meet the challenges of new domains.
• Civil Service Reform: The book critiques issues with personnel in the diplomatic and security establishments, suggesting the need for civil service system personnel reform to ensure the nation possesses highly qualified, loyal, and internationally competitive diplomats and intelligence experts.
• Compensation and Attraction: Specific measures include improving the compensation of SDF personnel and other public servants, aiming to enhance the attractiveness of critical positions and ensure the nation is not at a disadvantage in the talent competition.
Ⅲ. Core Challenges: The Dichotomy of Fiscal Sustainability and Tax Equity
Takaichi’s grand vision faces its most severe challenges at the fiscal level: how to simultaneously deliver on promises of massive tax cuts and bridge the significant defense spending gap while ensuring financial market stability.
1. The Defense Funding Dilemma and Conflict with Fiscal Discipline
Takaichi insists on issuing government bonds as the short-term financing source for defense and views economic expansion as the fundamental long-term solution. However, this stance directly conflicts with the fiscal discipline demanded by the Ministry of Finance (MOF).
• Funding Gap and Temporary Measures: Current plans require the government to secure an additional ¥14.6 trillion over five years. The government currently relies on temporary funding sources like asset sales and surplus usage, which lack continuity and stability.
• Political Pressure from Tax Hikes: Stable funding ultimately requires tax increases (income tax, corporate tax, tobacco tax), but public opinion is strongly against them. Takaichi’s approach politically avoids tax increases, but from a macroeconomic perspective, if economic growth falls short of expectations, reliance solely on debt expansion risks the stability of Japan’s finances.
2. The Structural Quagmire and Equity Debate of Financial Income Taxation
Amid Takaichi’s call for large-scale tax cuts to stimulate the economy, the treatment of lightly taxed financial income becomes a crucial test of her tax equity.
• The “¥100 Million Wall” Phenomenon: Financial income (capital gains and dividends) in Japan is subject to a single tax rate of about 20%. This causes a structural inequity known as the “¥100 Million Wall,” where, after annual income exceeds ¥100 million, the actual tax rate for high-income earners may decrease due to lower marginal tax rates on financial income compared to labor income.
• Policy Dichotomy (Revised): While Takaichi did not proactively propose it, strengthening financial income taxation is viewed as a potential solution to achieve tax equity and offset the funding gap. However, hastily raising investment tax rates could harm investor sentiment, conflict with the government’s long-standing goal of promoting a “Shift from Savings to Investment,” undermine the recovery momentum of the Japanese stock market, and contradict her primary goal of “expanding the economy.” This is the structural dilemma Takaichi must face in balancing equity and growth.
Conclusion: Japan’s New Path of Conservative Security and Fiscal Expansion
Sanae Takaichi’s “National Power Study” provides a comprehensive national strategy report, successfully integrating a tough conservative security strategy with radical active fiscal expansion to forge a new path for Japan distinct from the past. Her assertions are systematically and logically consistent in theory, emphasizing endogenous drivers from technology to human capital, and committed to escaping long-term deflation.
However, the risk profile of this policy is extremely high. The key to its success depends on two factors:
1. Realization of Economic Growth Expectations: Whether “Sanaenomics” can generate enough economic growth in the short term to naturally absorb the enormous defense spending and fiscal gaps resulting from tax cuts, thereby avoiding a fiscal cliff.
2. Balancing Politics and the Market: How to resolve the structural inequity of financial income taxation without damaging investor enthusiasm in the financial market; and how to effectively secure stable funding for defense spending amidst domestic social pressure and international security demands.
If these challenges can be successfully overcome, Japan may achieve a comprehensive upgrade of its national power and reshape its strategic standing in the Indo-Pacific. Conversely, if economic growth falls short, the policy could lead to fiscal deterioration, further exacerbating Japan’s structural problems.