Political uncertainty, including opposition parties' push for tax cuts without sustainable funding, is stalling economic reforms and risking further deterioration.

The combination of rising interest rates and political instability underscores the challenges Japan faces in maintaining economic stability amid shifting policies.

Japan's economic outlook is under scrutiny as concerns grow over the new LDP President Sanae Takaichi's policies, with market warnings against expanding fiscal measures.

Following Takaichi's appointment, the yen depreciated from 147 to 153 against the dollar, signaling market nervousness about future policy directions.

Takaichi has proposed increased government and private sector investments, especially in sectors like semiconductors, along with issuing more deficit-financing bonds, echoing Abenomics-style policies.

Japan is facing prolonged inflation and a weaker yen, which could accelerate price increases and hurt households, contrasting with its past deflationary struggles.

Long-term interest rates have risen to 1.7%, the highest in 17 years, reflecting market fears about rising debt and interest costs.

The Bank of Japan's end to monetary easing and rising interest rates threaten to increase debt burdens and make zero-interest policies unsustainable.

Expectations of expansionary fiscal measures initially pushed the Nikkei to a record high of 48,580 on October 9, but a sharp decline followed due to political instability.

To restore economic strength, Japan needs a comprehensive growth strategy focusing on boosting corporate investment, human resources, and wages, addressing issues left unresolved since Abenomics.

Takaichi's stance on monetary policy, which emphasizes government responsibility, is seen as an attempt to prevent the Bank of Japan from raising interest rates early, risking further inflation and yen weakness.