Japans new coalition eyes big spending, but not Abenomics 2.0

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Japans new Prime Minister Sanae Takaichi (C, first row) poses during a photo session with members of her cabinet at the prime ministers office in Tokyo, Japan October 21, 2025. PHILIP FONG/Pool via REUTERS REFILE - CORRECTING LOCATION FROM \PRIME MINISTERS OFFICIAL RESIDENCE\ TO \PRIME MINISTERS OFFICE\.

TOKYO - The new junior party in Japans ruling coalition is likely to give Prime Minister Sanae Takaichi the green light she needs for a big spending package, but will stop short of supporting a revival of Abenomics-style fiscal and monetary policies.

Takaichi made history this week becoming the countrys first female prime minister after she formed a new ruling bloc between her Liberal Democratic Party and the Japan Innovation Party, known as Ishin.

The partnership brings Ishin, which supports tax cuts and wealth distribution but focuses mainly on cutting red tape and wasteful spending, into government for the first time.

Ishins preference for small government contrasts with opposition parties that call for payouts and tax breaks, and may serve as a counter-weight to Takaichis bias towards big spending.

Ishin advocates small and efficient government in contrast to Takaichi, who has championed expansionary fiscal and monetary policy, said Takahide Kiuchi, an economist at Nomura Research Institute. Cooperation with Ishin could temper Takaichis policy instincts and lead to a more balanced economic approach.

To be sure, Takaichi is seen deploying a package of spending that exceeds