Go Big or Go Home
How Takaichi’s ruthless capitalism and Takanomics have Japan poised for resurgence in a changing world.
The combination of disruption accelerated by artificial intelligence (AI) and geoeconomic uncertainty dramatically raises the bar for public policy leaders. As private sector leaders realize that business as usual is not an option, and weigh the threats and opportunities, the more the government does to provide committed direction, the easier it will be for chief executive officers and their boards to commit new capital for growth.
The post-AI economic and social system is already emerging and, in my view, the Japanese government under Prime Minister Sanae Takaichi is global best in class. Takaichi’s unprecedentedly ambitious industrial policy plan is leading the charge to strengthen Japan’s post-AI resilience and sustainability by creating high-trust public–private partnerships. She is rebuilding Team Japan Inc.
The key strategic realities of Takaichi’s economic policy speak for themselves.
1. Unprecedented size of resource mobilization
The proposed ¥370 trillion in public–private partnership investment is just above 60 percent of today’s gross domestic product (GDP). This is three times bigger than the last multiyear industrial policy initiative launched by Japan. In 1973, then Prime Minister Kakuei Tanaka’s “Remodeling of the Japanese Archipelago” was less than 20 percent of GDP at the start. Takaichi’s philosophy has always been “go big or go home.”
2. Duration of public policy commitment
Before Takaichi, there were basically only two areas in the national budget in which funding was guaranteed for more than one year: public education (three years) and national defense (five years). Everything else was subject to annual budget fights and required lobbying the Ministry of Finance to secure continued commitment for either the main budget or a supplementary budget. Rightly, Takaichi wants to get away from Japan’s budget ad hocism and replace it with strategic, high-trust, long-duration funding via public–private partnerships, with 17 focus sectors and eight cross-sector target areas committed to through 2040.
3. Focus on public–private partnership funding and “crowding in” of private risk capital
Importantly, the ¥370 trillion is not simply deficit financing but investment through public–private partnerships. I expect about 10 percent to come from on-balance-sheet national government debt; 60 percent from private corporations, asset owners, and investment managers; and 30 percent coordinated and syndicated by off-balance-sheet public policy financing firms such as the Development Bank of Japan and the Japan Investment Corporation.
Clearspeak: Takaichi is rebuilding Team Japan Inc., which means that fears of unfunded government overspend are likely unwarranted.
If I am right, one of the key implications will be a dramatic shift in corporate governance focus, away from turning “lazy balance sheets” into higher dividends or share buybacks to raise debt and equity capital to fund the private sector’s contribution to the ambitious investment-for-growth push.
Clearspeak: Japan’s cost of capital is poised to rise, which in turn will speed up industrial consolidation and corporate restructuring.
4. Conviction that technocrats’ guidance and top-down industrial policy are essential to mobilize and guide the flow of Japan’s private-sector savings into investment
Over the past 30 years, Japan’s industrial policy prioritized deregulation, privatization, and financialization. Meanwhile, fiscal policy prioritized tactical support packages for zombie companies, protection of vested-interest players from the disruption forced by deregulation and technological progress, as well as an ever-growing expenditure drain from rising entitlement claims in general and surging medical and pension costs in particular.
Specifically, the government “consumed” and supported the weak, while the strong and well capitalized part of the private sector was left to invest on its own terms. The result was an ever-growing proportion of Japanese savings channeled into overseas rather than domestic investments. Between 1995 and 2025, the share of total profits generated by listed companies from overseas sales surged from less than 20 percent to more than 60 percent—a smart and rational rise in Japan’s return on investment engineered by strong company CEOs realizing that genuine laissez-faire growth investment opportunities abroad were a better bet than the vested-interest-entangled laissez-faire cosplay offered in Japan. To wit: Japan’s two richest men—Fast Retailing’s Tadashi Yanai and SoftBank’s Masayoshi Son—made their fortunes from overseas investments, predominantly in China and the United States, rather than from their domestic production strategies.
“Takanomics is a commitment to create domestic winners with a long-duration, domestically focused industrial policy and a high-trust, stable financing strategy. ”
Team Takaichi is convinced this can and must be reversed by refocusing CEOs’ minds on Japan’s pre-1990s high-trust public–private partnership investment-for-growth model. Takanomics is a commitment to create domestic winners with a long-duration, domestically focused industrial policy and a high-trust, stable financing strategy. Takaichi’s goals are neither tactical nor cyclical; they are structural, urgent, long-term, and openly nationalistic.
Importantly, the fact that there are 17 strategic areas does not indicate a lack of focus by Team Takaichi, but presents each and every company with an opportunity to join Team Japan. No Japanese CEO, whether they lead an industrial, commercial, services, consumer, high-tech, low-tech, or financial company in literally any sector, can fail to find a strategy for growth that aligns with their company’s and Takaichi’s priorities. Something for everybody, no one excluded, no excuses. Come join Team Japan.
In the coming months, I shall not be surprised to see Team Takaichi start publicly shaming CEOs who will not participate and commit to her new national agenda, just as the Tokyo Stock Exchange (TSE) started to threaten to shame CEOs who refuse to present concrete strategies to raise capital efficiency and shareholder value above at least 1x book value (the Yamaji Initiative, launched by the TSE under then president and CEO Hiromi Yamaji in March 2023, just before he became CEO of the Japan Exchange Group).
5. Commitment to promote holistic and balanced economic development, with a strong focus on human capital development, social resilience, and regional diversification
Takaichi’s vision is not that of a winner-take-all, socially divisive, tech-will-solve-all-our-problems utopia. Rather, it is clearly focused on creating a new human-centric economic structure. Her team is dead set on wanting to avoid the extreme lopsidedness of recent growth dynamics in both the United States and China. AI and the infrastructure it requires are important parts of Takanomics, but AI is by no means the only or primary focus. Regional diversification and the empowerment of local public policy decision-makers are, for example, core elements of the implementation strategy.
6. Last but not least, a future-positive cockiness
Team Takaichi’s ambitious plan sends a strong message to private sector leaders. No, Japan is not constrained by demographics, a lack of natural resources, or a lack of domestic capital. Instead, it is perfectly capable of pushing the production possibility frontier and creating economic abundance, prosperity, and, yes, greater self-sufficiency.
In a remarkable shift in leadership style, Takaichi’s economic policy is not stuck in a vague and high-minded discussion group looking for a New Capitalism à la Fumio Kishida. In fact, she much prefers to decide and act rather than discuss and build consensus. Her capitalism is ruthlessly focused on creating a united Team Japan, where public–private partnerships inspire a new future-positive can-do leadership mindset committed to forcing the next evolution of Japan’s economic, industrial, and social structure.
This is good for Japan, and fantastic news for global companies looking to become an integrated partner in the new Japan that is poised to emerge.
