Japanese Prime Minister Sanae Takaichi led her ruling coalition to a historic election victory on Sunday, strengthening her grip on power and clearing the path for her promised tax cuts and increased military spending aimed at countering China. The election result is being seen as a major political shift in Japan with economic plans that have already unsettled financial markets.

Takaichi, a conservative leader and Japan’s first female prime minister, has often said she is inspired by Britain’s former leader Margaret Thatcher, famously known as the “Iron Lady.” Her Liberal Democratic Party (LDP) won 316 seats out of 465 in the lower house of parliament, marking the party’s best-ever result.

With coalition partner Japan Innovation Party (Ishin), Takaichi’s alliance now holds 352 seats, giving it a two-thirds supermajority. This is significant because it allows her coalition to push through legislation more easily and even override the upper chamber, where she does not have a majority.

Speaking as results came in, Takaichi said, "This election involved major policy shifts — particularly a major shift in economic and fiscal policy, as well as strengthening security policy." She also acknowledged that her agenda has faced resistance, saying, "These are policies that have drawn a great deal of opposition ... If we have received the public's support, then we truly must tackle these issues with all our strength."

The rare winter election was held amid heavy snowfall in several regions. Many residents walked through snow to cast their votes, with record snowfall in some areas causing traffic disruptions and forcing some polling stations to close early. It was only the third postwar election held in February, as Japan usually holds elections during milder seasons.

Takaichi, 64, called the snap election to take advantage of strong public approval ratings since she became leader of the long-ruling LDP late last year. Her straight-talking and hardworking image helped attract voters, particularly younger people.

Her rise has also led to a youth-driven craze known as “sanakatsu,” loosely translated as “Sanae-mania.” Items such as her handbag and the pink pen she uses to write notes in parliament have reportedly become popular and are in high demand.

However, her economic promises have caused anxiety among investors. Takaichi had pledged to suspend an 8% sales tax on food, aiming to help households struggling with rising prices. Financial markets have reacted nervously because Japan already carries the heaviest debt burden among advanced economies, and questions remain about how the government would fund the tax cut.

On Sunday, Takaichi said she would move quickly on the issue while also keeping fiscal responsibility in mind. She stated she would speed up consideration of the tax cut while focusing on sustainability.

Chris Scicluna, head of research at Daiwa Capital Markets Europe in London, said, "Her plans for the cut in the consumption tax leave open big question marks about funding and how she's going to go about making the arithmetic add up."

The head of Japan’s top business lobby, Keidanren, Yoshinobu Tsutsui, welcomed the election outcome, calling it a return to stability. He said, "Japan's economy is now at a critical juncture for achieving sustainable and strong growth."

The LDP has governed Japan for most of the postwar period, but has faced setbacks in elections over the past 15 months under Takaichi’s predecessor, Shigeru Ishiba, during which the party lost control of both houses. Takaichi’s victory signals a major turnaround for the party.

International reactions also followed quickly. U.S. President Donald Trump congratulated Takaichi in a social media post, wishing her "great success in passing your Conservative, Peace Through Strength agenda." Trump also said, "Sanae's bold and wise decision to call for an election paid off big time," and confirmed he will host her at the White House next month.

Takaichi’s strong nationalist stance and focus on security policy have strained relations with China. Soon after taking office, she triggered the biggest dispute with Beijing in more than a decade by publicly outlining how Japan might respond if China attacked Taiwan. China responded with countermeasures, including urging its citizens not to travel to Japan.

Taiwan President Lai Ching-te was among the first leaders to congratulate her, saying he hoped her win would "bring a more prosperous and secure future for Japan and its partners in the region".

Her strong mandate could also accelerate Japan’s defence expansion plans. Beijing has criticised her, portraying her as someone trying to revive Japan’s militaristic past. Still, Japan’s Defence Minister Shinjiro Koizumi said on Sunday that he wanted to push ahead with defence strengthening policies while keeping communication open. He said he aimed to pursue stronger defence measures while continuing dialogue with China.

Analysts believe China will not be pleased with the outcome. David Boling, principal at the Asia Group, said, "Beijing will not welcome Takaichi’s victory." He added, "China now faces the reality that she is firmly in place — and that its efforts to isolate her completely failed."

With her coalition now holding a powerful supermajority, Takaichi is expected to move quickly on her key promises, including tax cuts and security reforms, as Japan enters a new political phase under its first woman prime minister.