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.

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“Takanomics is a commitment to create domestic winners with a long-duration, domestically focused industrial policy and a high-trust, stable financing strategy. ”

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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.

Pax Nipponica

Why Japan is best positioned to lead a changing world.

Japan is in a unique position to emerge as a true 21st-century global leader. Clearly, the world is becoming increasingly polarized, confrontational, and uncertain. Who will write the rules governing our future? In my view, no nation is better placed than Japan to mediate between the two current superpowers, the United States and China. This is true for all aspects of policy leadership, not just trade, finance, and economy but also diplomacy and global security. 

The primary lesson of the 21st century so far is that neither Pax Americana nor Pax Sinica is an acceptable solution for much of the world. Yes, there is intensifying rivalry between the two, but for different reasons. Neither Washington nor Beijing offers a credible answer to the aspirations of the Global South or the problems facing old-world Europe. And the more both Washington and Beijing leaders insist on a with-us-or-against-us approach to their allies, the greater the resentment against the hegemon will grow. Trust is eroding fast. In contrast, a Pax Nipponica would almost certainly be welcomed by the world. Japan has what it takes to mediate and moderate a new world order. Japan is the honest broker the world can trust.

To be sure, my vision of a Pax Nipponica is a next step evolution from the Pax Britannica (1815–1914) and the Pax Americana (1945–???). Both Britain and America ruled the world by brute force: Their currencies were the undisputed anchor currencies of the global financial system; their leading companies were the undisputed innovators and oligopolistic leaders of global commerce; their universities attracted and educated the best and brightest from all over the world; and their armies were the most advanced and dominant. Today’s Japan has none of this. There is literally no area in both hard and soft power where Japan dominates the world. And that’s precisely why Pax Nipponica is possible.

Japan is not threatening, not feared; but it is admired. Japan is the world’s only true post-industrial society, a frontrunner in many areas. It is a role model for having engineered the fastest and most successful economic development ever, for having a socio-economy resilient enough to survive the biggest deflation cycle in history without suffering social unrest and disruptive inequality. It is now teaching the world how to age gracefully and how to maintain and create equitable prosperity by enhancing asset income rather than relying primarily on employment income.

All over the world, Japan is admired for its exemplary balance between intense economic modernization and solid perseverance of national traditions and social norms; for having not just imported Western culture, but perfected and improved upon it in so many areas—from architecture and fashion to food and video games, and even sports such as male and female figure skating, golf, and baseball.

Make no mistake: Viewed from a global perspective, Japan is the most highly respected nation and culture in the East, West, North, and South of this world. Japan has what it takes to lead a global Pax Nipponica.

What’s Next for Japan?

What about the domestic perspective? Is Japan’s elite ready to lead and orchestrate a global Pax Nipponica? It is, of course, not quite right for a non-Japanese to answer this question. I personally think the answer should be yes. This is because the world desperately needs a trusted and honorable mediator, now more than ever. More importantly, in my view, the country stands at a historic inflection point—Japan needs to embrace and rally behind a new goal. Post-war, post-bubble, post-deflation, post-lost decades—Japan knows what’s behind it, but doesn’t quite know where to go from here.

It is not a coincidence, in my view, that the Liberal Democratic Party (LDP) has once again lost control of parliament, just as they did in the early 1990s when Japan had a similar breakpoint in the zeitgeist once the overarching post-war goal of catching up to the United States had been achieved. Now the overarching post-bubble goal of ending deflation and, at the same time, gracefully restructuring the baby boomer salarymen-based corporate culture has also been completed. Then as now, the LDP has no answer to “What’s next for Japan?”

Beyond the Settlement

When I arrived in Tokyo almost 40 years ago, then-Prime Minister Yasuhiro Nakasone was promoting his Comprehensive Settlement of the Post-War Accounts (Sengo Seiji no Sokessan). To me, as a German national, a lot of Nakasone’s arguments and reasoning made sense. To this day, I very much admire his central demand that there must be more to Japan’s national ambitions than economic centrism (keizai chushin shugi), and that Japan should unmark itself as a defeated country and build a post post-war system.

However, I have always been puzzled by how inward-looking, how narrowly focused on only Japan the elite’s call to settle post-war accounts has been. No global aspirations, no vision, and no demands on Japan’s elite to leverage the country’s strength and wisdom to build a better world and promote a better humanity.

Forty years ago, this was perhaps understandable, because Japan’s elite still needed to muster strength to say no to America: it was a big deal when Sony founder Akio Morita and then LDP heavyweight Shintaro Ishihara published an article by that title—「NO」と言える日本—in 1989 in Japanese. The English version was released in 1991. Was Japan’s elite really ready to revolt against their US masters, or was this just a sign of bubble-empowered hubris? Either way, it was all “no” with zero insights or vision of the new “yes” for which Japan should strive.

But that was then. In 2026, Japan has a unique opportunity to reset national ambitions and goals. It’s not about saying yes or no to America (or China). The world is waiting for Japan to say, “We propose to do it this way.” Japan has what it takes to be a global rulemaker and mediator between East and West, North and South. Pax Nipponica is an ambition the world is waiting for, and one Japan’s elite should embrace. As a Japan optimist, I hope they will.