Sanae Takaichi will likely be elected Japan’s next prime minister when parliament meets on October 15. She faces a myriad of challenges, including controlling inflation and restoring waning public confidence in the Liberal Democratic Party (“LDP”) after a political slush fund scandal. In 2024, the LDP’s conservative Seiwa Seisaku Kenkyūkai and Shisuikai factions were dissolved, and several LDP lawmakers resigned, after an investigation found underreported campaign funds, some of which were rerouted as kickbacks. In September 2024, the treasurer of LDP’s largest faction was found guilty of violations of the Political Funds Control Act and received a three-year prison sentence, suspended for five years. An internal party survey revealed that 85 LDP members failed to report approximately JPY 580 million (USD 3.85 million) over five years from 2018.
Misuse of campaign funds has not been the government's only touchpoint with corruption. In 2024 the US Securities and Exchange Commission announced that a cryptocurrency mining company agreed to pay a $4 million civil penalty to resolve charges it engaged in a bribery scheme, including making illicit payments to members of Japan’s parliament, in efforts to establish a casino in Japan. The world took notice of these problems. Japan dropped two places in Transparency International's 2024 Corruption Perceptions Index, although it is still considered a low risk jurisdiction for corruption and Foreign Corruption Practices Act ("FCPA") violations.
Domestically, the scandals caused widespread public anger and increased sentiment that politicians are out of touch with ordinary Japanese people, who have been suffering from cheap yen inflation. However, analysts question whether Takaichi, who is a protégé of the late former Prime Minister Shinzo Abe and “Abenomics”, will set policies that will dampen inflation. Conversely, she has publicly advocated for loose monetary policy and aggressive fiscal spending on energy and security, which if implemented is unlikely to bring prices down. Given the tough choices before her, Takaichi will likely need to quickly form a coalition with opposition parties, or face the prospect of being pushed through Japan’s revolving door of prime ministers. While Takaichi has indicated her commitment to increase transparency in political funding, she has not presented any concrete measures. In a press conference following her election as LDP president on October 4, Takaichi stated that lawmakers involved in the slush fund scandal would not be excluded from party leadership positions.
Foreign direct investment ("FDI") into Japan has been increasing in recent years. In 2023 alone FDI increased by 9.3%, according to the Japan External Trade Organization. Hoping to continue this trend, in June 2025 the government announced a 20% increase for its 2030 FDI target. However, foreign observers question whether Takaichi, described as Japan's “Iron Lady” will prioritize anti-corruption measures in a meaningful way. One Asia based corporate counsel said, “I spend most of my time worrying about corruption in Vietnam, Indonesia and other emerging markets. But it's just as easy to face a significant FCPA fine if you don't keep an eye on Japan and South Korea.”
Takaichi’s rise to power followed an unusual path in Japan, where many senior officials come from prominent political families. Her father worked at a car company, and her mother was a police officer. After graduating from University in Japan, she received sponsorship from the Matsushita Institute of Government and Management to travel to the United States and intern with Representative Patricia Schroeder of Colorado. After returning to Japan, she won her first election in 1993 to the Japanese parliament's lower house. A former motorcyclist and heavy metal drummer turned hardline conservative, Takaichi campaigned with the slogan “Japan is back!”.
One of her first official duties will be meeting President Trump and discussing trade when he visits Japan later in October. Chances are that corruption issues won't be on the table for discussion. Trump's order to halt enforcement of FCPA violations ended in June 2025 when the U.S. Department of Justice shifted to a new “America First” approach to FCPA enforcement. The DOJ's Criminal Division Head Matthew R. Galeotti said the new guidelines would bring “enforcement actions against conduct that directly undermines U.S. national interests without losing sight of the burdens on American companies that operate globally.” Japan may be fertile ground for Trump to leverage his new America First FCPA agenda if Takaichi continues to leave corruption risk unchecked in Japan. Foreign investors take heed.
Following losses in two straight national elections, the LDP did some soul-searching about what went wrong. The party is divided over Abe Shinzo’s legacy and how to convince the public that it hears their frustration about the slush fund scandals that afflicted his rightwing faction most.
https://time.com/7323329/sanae-takaichi-japan-prime-minister/
