China, inflation could pop Japan PM's bubble

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Charming Donald Trump one week, angering China the next, Japan's Prime Minister Sanae Takaichi has had a busy start and is riding high in the polls, all on a few hours of sleep a night.

But the honeymoon may end soon for the Margaret Thatcher-admiring premier, if the current spat with China escalates further and she fails to keep inflation in check.

"I believe Prime Minister Takaichi will surely do what she needs to do, so I trust her," Kozue Otsuka, 50, told AFP at a festival this week for business-owners seeking good fortune.

But buying a lucky "kumade" rake featuring a smiling goddess of mirth, the housewife added: "I hope that Japan–China relations will gradually move in a better direction."

"What I am worried about, most of all, is the (prime) minister's remarks. China got really agitated because of that," echoed Shigeru Fujita, 78, who runs a gardening company.

Hole in one

Takaichi has admitted only sleeping two to four hours a night.

Trump arrived a week into her term and Takaichi won plaudits for pulling out all the stops to pacify the US president.

"I was very impressed and inspired by you," Takaichi gushed, gifting him a golf club used by slain ex-premier Shinzo Abe, a common friend.

Trump said Takaichi would become "one of the greatest prime ministers".

Taiwan

Days before Takaichi was at an ASEAN summit in Malaysia, and then at an APEC gathering in South Korea where she met Chinese President Xi Jinping.

 

Japan's Prime Minister Sanae Takaichi (L) gestures as US President Donald Trump delivers a speech in front of US Navy personnel on board the US Navy's USS George Washington aircraft carrier at the US naval base in Yokosuka on October 28, 2025.

All seemed cordial, but Takaichi -- long seen as a China hawk -- kicked up a hornet's nest a week later.

She told parliament -- apparently in unplanned remarks -- that a Taiwan "emergency" could threaten Japan's existence, implying that Japan would intervene militarily.

With one diplomat threatening to sever Takaichi's "dirty neck", a livid Chinese government advised citizens to avoid Japan.

With big-spending Chinese tourists the biggest cohort, this was a blow. China then also reportedly reimposed a ban on Japanese seafood imports.

Margarita Estevez-Abe, an analyst at Syracuse University's Maxwell School, said China still holds "so many economic cards to punish Japan, but Japan has none".

These could include China restricting exports of rare earths to Japan or curbs on Japanese exports to China.

Takaichi's appointment "was a very risky choice for the China-Japan relationship at a very delicate economic moment for Japan," Estevez-Abe told AFP.

"Starting a fight against someone stronger with no prior planning is no leadership," she said.

Stimulus

Takaichi last week unveiled an economic stimulus package worth $135 billion, including cash handouts to parents and energy subsidies.

She hopes to avoid the fate of her predecessor Shigeru Ishiba, who suffered a string of election debacles in part because of anger over rising prices.

Despite the creation of a DOGE-style cost-cutting initiative and promises of a "responsible" fiscal policy, concerns abound that the stimulus will add to Japan's colossal debt.

This has contributed to a slide in the yen -- which will increase Japan's hefty import bill and push up inflation.

"Ordinary people are having it tough these days," financial services employee Kazuo Kaitsuka, 75, told AFP.

"I worry future generations might have to deal with the consequences (of the debt)," he said.

Viral handbag

One Yomiuri survey this week gave Takaichi's cabinet an approval rating of 72 percent.

Even her handbag has gone viral with its 145-year-old Japanese leather goods maker flooded with orders, reports said.

Takaichi's popularity has raised speculation that she might even call snap elections.

But analyst Tobias Harris at Japan Foresight told AFP that he wonders how "durable" her ratings are.

A key factor could be how successful Takaichi is in halting a rise in backing for the populist anti-immigration Sanseito party.

"(Her) strong support has not necessarily translated into stronger support for the LDP itself," Harris said, referring to the ruling Liberal Democratic Party.

"My sense has been that in the near term the tensions with China have helped her -- or haven't hurt -- but I feel like there are signs that some in the LDP are wondering that if it drags on, it could weigh on her," Harris said.