(Adds comment) TOKYO, Oct 4 (Reuters) – Sanae Takaichi is likely to be Japan's first female prime minister after winning the race on Saturday to lead the ruling Liberal Democratic Party. The former internal affairs minister, a conservative nationalist with an expansionary agenda, is expected to replace Prime Minister Shigeru Ishiba since the LDP is the largest in parliament. Below are comments on the outcome: TOMOHISA ISHIKAWA, CHIEF ECONOMIST, JAPAN RESEARCH INSTITUTE (On Takaichi’s advocacy of 'responsible proactive fiscal policy') "The key issue is whether it's possible to strike a balance between fiscal reconstruction and economic growth. Since the term 'responsible' is included, I hope that attention will be paid to fiscal discipline. That said, she has mentioned that issuing deficit-financing bonds is among the options, and given her stance of 'inheriting Abenomics,' we must be cautious about the risk of fiscal expansion." (On the BOJ's interest rate policy) "It may have become more difficult for the BOJ to raise interest rates. However, with the yen weakening and prices rising, it has become harder for politicians to interfere in monetary policy as they did in the past." (On overall economic policy) "I think economic policy has taken a slightly more realistic approach." SHIGENOBU TAMURA, POLITICAL COMMENTATOR, TOKYO "I was surprised by Sanae Takaichi's victory, but I believe that her overwhelming results in the rank-and-file member votes influenced the parliamentary voting. It was also significant that former Prime Minister Taro Aso came out in support of Takaichi. "The birth of Japan's first female prime minister is a very welcome development and will be highly regarded internationally. I also expect that Takaichi will be able to win back the support of the solid conservative base that the LDP lost in lower house and upper house elections. "I expect that U.S. President Donald Trump will not take a strong stance against a female prime minister. Japan remains an important partner in the U.S. strategy towards China, so the relationship between the Takaichi administration and President Trump should be good." DAISUKE UNO, CHIEF STRATEGIST, SUMITOMO MITSUI BANKING CORP "Amid a global political trend of 'putting one’s own country first' Japan seems to have elected someone who aligns with that sentiment. Within the LDP, there has been a swing back towards the former mainstream faction. Considering that Sanae Takaichi won the votes of party members and supporters, it appears that public sentiment has been reflected in the outcome. "If Takaichi seeks to collaborate with opposition parties going forward, she is likely to align with the Democratic Party for the People, which shares similar policy views. This could bring more attention to proactive fiscal policies. However, given that she reportedly received support from the Aso faction during the leadership race, and that her position will change as she assumes the role of Prime Minister, it remains uncertain whether she can implement the policies she has previously advocated. "An example is her proposed measures to address inflation that include abolishing the provisional gasoline tax rate and introducing refundable tax credits, which are somewhat different from a consumption tax cut (that she previously advocated). Therefore, concerns about aggressive fiscal policy may ease somewhat. "Regarding the Bank of Japan's monetary policy, based on Takaichi’s statement that 'the government sets the direction, and the BOJ determines the means,' it is expected that there will be some restraint on monetary tightening. "The recent speculation about an early interest rate hike by the BOJ is likely to recede. In fact, recent comments from the BOJ's governor and deputy governor have consistently aimed to balance against excessive expectations of rate hikes. With Takaichi's victory, it is expected that the outlook for BOJ rate hikes will be dampened. "At the start of the week, the yen bond market is likely to see buybacks led by the short- to medium-term zone, and long-term interest rates may fall below the 1.60% range. As for the super-long-term zone, upward pressure on interest rates is not expected to be significant. As the party's personnel appointments and potential coalition with opposition parties become clearer, fiscal policy will likely be reassessed." HIROKI TAKEI, STRATEGIST, RESONA HOLDINGS "This could be considered a positive surprise for stock prices. In the short term, Japanese equities are likely to react with gains. Prior to the announcement, overseas betting sites had viewed Farm Minister Shinjiro Koizumi as the frontrunner. "Recently, the Nikkei average has been trading near its highs, with an increase in the ratio of short-selling and a buildup of margin short positions. If short-covering is triggered, the rally could gain momentum, potentially pushing the index toward the 47,000 level. "On the policy front, Takaichi has strongly emphasised economic growth, which could benefit sectors such as semiconductors, artificial intelligence (AI), space-related industries, defence enhancement, and national resilience. After the Japan-U.S. tariff agreement, there was a shift in capital from domestic demand stocks to export-oriented ones, but domestic demand stocks may once again become attractive investment targets. "The fact that she is the first female president of the LDP could strongly signal change to investors. If foreign investors, anticipating structural reforms, begin buying physical shares, a moderate medium- to long-term uptrend could be expected. However, if the rally is led by short-term players through futures trading, it could reverse quickly, so caution is warranted. "In terms of cooperation with opposition parties, the Democratic Party for the People is likely to be the closest in terms of policy alignment. In the short term, the stock market may focus on a growth-driven rally, but fiscal discipline could become more relaxed. As the market stabilises, concerns about over-valuation may emerge, and attention will need to shift to long-term interest rate trends." YOSHINOBU TSUTSUI, CHAIR, JAPANESE BUSINESS LOBBY KEIDANREN "Takaichi is a seasoned politician with deep expertise across a wide range of policy areas, including the economy and foreign affairs. "As the first female (LDP) president, we expect her to revitalise the LDP and address Japan's pressing challenges, including tax, fiscal and welfare system reform, labour market reform and energy security. "We hope that, under the new leadership, the LDP will unite and, together with its coalition partner Komeito, swiftly establish a stable political framework capable of steadily advancing key policies." TAKAHIDE KIUCHI, EXECUTIVE ECONOMIST, NOMURA RESEARCH INSTITUTE "Takaichi adheres to the traditional reflationist view that the government should determine the broad direction of monetary policy. As such, there is a possibility she may intervene in the Bank of Japan’s policy operations going forward. The interest rate hike expected in October – already priced in by about 60% of the market – may be delayed by the BOJ, as a failed hike could invite political interference. That said, unless the U.S. economy weakens significantly, I don't believe the Takaichi administration would halt the BOJ’s overall policy of rate hikes. "Among the five candidates, Takaichi has advocated the most expansionary fiscal policy. This could lead to rising interest rates, a weaker yen, and higher stock prices in financial markets. However, since the LDP is a minority ruling party in both houses of the Diet, cooperation from opposition parties is essential to implement her policies. Therefore, I expect the more extreme aspects of her proposals will be diluted during the legislative process. "To expand its coalition under Takaichi, the LDP would likely look to parties with similar policy positions. The Sanseito party is ideologically close, but a coalition with…
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