'The Takaichi Fallout': Economic securitization adds fiscal burden on Japan

Editor's note: Lu Hao, a special commentator on current affairs for CGTN, is dean of the Strategic Studies Department of the Institute of Japanese Studies, Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN.

Economic security has become a core pillar of Japan's political agenda, with supply chain resilience, technology controls, and industrial "decoupling" now standard policy tools. Driven by nationalist politicians led by Sanae Takaichi, this fusion of right-wing politics and security policy has spawned a mounting economic burden — "The Takaichi Fallout". Security-first policies inflate fiscal outlays, fracture regional supply chains, and squeeze trade and investment, as political logic hollows out Japan's economic foundations. These costs feed on social anxiety, which politicians exploit — locking Japan in a destructive cycle of public fear, rightward policy drift, and economic damage.

Japan's embrace of economic security rhetoric is rooted in decades of social malaise following the asset bubble collapse. Real wages have largely flatlined for 30 years, the middle class has fragmented, and an aging, shrinking workforce keeps driving up pension and care costs. Stagnant wages and bleak prospects have exhausted public patience for reform. Right-wing politicians exploit this frustration — deflecting governance failures by hyping external threats. Building on Abe's nationalist playbook, Takaichi weaponized national insecurity, spearheading the Economic Security Promotion Act to enshrine tech controls, state support for critical industries, and tighter foreign investment screening into law. 

Takaichi costs are now dragging on growth across the economy. Successive defense budget hikes, accelerated arms production, and relaxed weapons export rules have diverted public funds from household support, small and medium-sized enterprises (SME) subsidies, and industrial upgrading. 

With public debt exceeding 230% of GDP, runaway spending and a weak Japanese yen are stoking imported inflation and squeezing living standards. The Economic Security Promotion Act's curbs on semiconductor, materials, and manufacturing technology outflows — and tightened foreign investment screening — are chilling China–Japan technical ties. Manufacturers forced to overhaul supply chains face steeper procurement and R&D costs, while firms with deep East Asian roots sacrifice scale efficiencies, leaving SMEs with shrinking orders and thinner margins. Politically inflamed rhetoric has poisoned bilateral business sentiment. The steep decline in Chinese tourist arrivals could, in a worst‑case scenario, trim Japan's GDP by up to 0.3 percentage points — laying bare how quickly the dividends of economic complementarity can come under pressure.

Rising Takaichi costs have split public opinion and distorted economic restructuring, trapping Japan in a feedback loop where anxiety, polarization, and economic decline reinforce each other. Conservative voters back hawkish policies, solidifying the right's electoral grip, while businesses and wage earners facing higher prices, eroding jobs, and falling disposable incomes grow louder in their criticism — deepening fragmentation and governance volatility. 

Industrial resources are being channeled into defense manufacturing, alternative energy, and domestic chip production at the expense of traditional export industries. Japan's proven growth model — built on East Asian industrial specialization — is being abandoned for a costly, subsidy-dependent push for self-sufficiency that undermines long-term growth.

Japan's strategy of manufacturing anxiety to fuel conservatism — and sacrificing economic efficiency to security imperatives — is a prescription for structural stagnation. Fear-driven politics, forced industrial fragmentation, and mounting Takaichi costs cannot cure Japan's demographic headwinds or weak consumption; they only erode its industrial base faster. Only by shedding right-wing populism, respecting market logic, and re-engaging in regional economic cooperation can Japan halt the spiral and repair its fractured social compact.