Regional Summary
The Mandate Trap Sanae Takaichi, the prime minister, commands the largest single-party majority in postwar Japan, with 316 of 465 lower-house seats, yet the scale of her triumph conceals its fragility. Donald Trump’s pre-election endorsement and a White House invitation give her borrowed legitimacy that depends on continued American goodwill—a commodity whose price has risen sharply. The Nikkei’s record high flatters a mandate built on stimulus promises that must eventually collide with Japan’s debt burden. A two-thirds supermajority removes legislative obstacles but also removes excuses: Ms Takaichi now owns every consequence, from constitutional revision to any friction with Beijing, with no coalition partner large enough to share the blame. Indonesia offers the starkest warning of what happens when an outsized mandate meets unchecked ambition. Prabowo Subianto, the president, enjoys approval ratings near 80%, yet his state investment fund, Danantara, triggered the worst two-day stock rout since the Asian financial crisis of 1997-98. MSCI questioned transparency; Moody’s cut the credit outlook to negative; foreign capital fled. That Danantara responded by ordering asset managers to buy shares while breaking ground on $7bn of industrial projects captures the contradiction perfectly: the same institution meant to gather national wealth is frightening away the private capital it needs. Mr Prabowo’s coalition has already endorsed him for a second term, but popularity before a crisis is a wasting asset once the crisis arrives. Lee Jae-myung, the president, is testing the same formula more carefully but no less boldly. Approval at 63% has emboldened him to summon chaebol chairmen and extract 300tn won in regional investment pledges while rebuking a finance minister for hesitation. His campaign to make holding multiple properties “impossible” is popular, but governing by Twitter ultimatum risks turning policy into theatre. A US congressional subpoena of Coupang and an investigation into Korean regulatory agencies hint that Washington’s new framework prizes reciprocity over alliance loyalty—a constraint no domestic approval rating can override. Retail investors may be defending KOSPI with 4.5tn won in net purchases, but foreign sellers dumping 2.2tn won suggest that external confidence is less easily commanded. Taiwan and Australia illustrate how even leaders without supermajorities are losing the buffers that once restrained executive overreach. In Taipei, Lai Ching-te, the president, calls relations with Washington “rock solid” even as TSMC’s decision to produce 3nm chips in Japan quietly dissolves the silicon shield that underpinned Taiwan’s strategic value. The opposition Nationalist Party’s freelance engagement with Beijing and the legislature’s blockade of the defence budget leave Mr Lai strong in rhetoric but hemmed in by institutions. In Canberra, the Reserve Bank’s rate rise—unique among major economies—lands on a prime minister whose political comfort owes more to an opposition in freefall (the Coalition’s primary vote has sunk to 18%, behind One Nation) than to any clear mandate. Anthony Albanese, the prime minister, is deepening security ties with Jakarta and selling off 67 defence sites to fund modernisation, yet a US Congressional Research Service report openly muses about withholding AUKUS submarines unless Australia commits to supporting America in a Taiwan war. Strength borrowed from a rival’s weakness is not strength earned. Leaders are accumulating political authority faster than they are building the safeguards, market credibility or alliance strength to sustain it. Mandates this large tend to consume themselves. The question is not whether voters have granted power—they have—but whether any of these governments can convert a permission slip into lasting policy before the next shock, domestic or external, reveals how thin the margin really is.Country Summaries
Japan
Japan’s ruling Liberal Democratic Party achieved the largest single-party victory in postwar history, giving Prime Minister Sanae Takaichi unprecedented power to reshape the country’s politics and international posture.
The Liberal Democratic Party (LDP) secured 316 of 465 seats, creating a two-thirds supermajority that exceeds all previous postwar records. Combined with coalition partner the Japan Innovation Party, the ruling bloc won 352 seats, a dramatic expansion from their previous 233-seat majority. The result gives Ms Takaichi extraordinary governing authority, including the constitutional threshold needed to propose amendments from the lower house and sufficient political capital to pursue assertive foreign policy positions despite external pressure.
The victory drew immediate international validation. President Donald Trump congratulated Ms Takaichi on her electoral triumph and announced plans to host her at the White House on March 19. Mr Trump had endorsed Ms Takaichi before the election, praising her “Conservative, Peace Through Strength Agenda.” Markets responded with equal enthusiasm: the Nikkei 225 hit an all-time high of 54,782.83, continuing the “Takaichi trade” that began when she became LDP leader. The surge reflects investor confidence in her stimulus policies and electoral mandate for continued economic expansion.
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- Mr Trump congratulates Ms Takaichi and announces March summit invitation — US President Donald Trump congratulated Ms Takaichi on her election victory and announced plans to host her at the White House on March 19. Mr Trump had earlier endorsed Ms Takaichi before the election, praising her “Conservative, Peace Through Strength Agenda.” (reuters.com)
- Ms Takaichi’s viral popularity and ‘Sana-mania’ drives youth engagement — Ms Takaichi’s campaign generated unprecedented social media engagement, with her YouTube video surpassing 100 million views. The “Sana-mania” phenomenon saw young voters embracing everything from her pink pen to handbags, creating a pop culture-like following around Japan’s first female prime minister. (japantimes.co.jp)
- Emperor Naruhito hosts Nepal President in Tokyo diplomatic meeting — Emperor Naruhito and Empress Masako met with Nepalese President Ramchandra Paudel and his wife at the Imperial Palace. The meeting commemorated 70 years of diplomatic relations and included discussion of water advocacy and earthquake assistance. (ntv.co.jp)
- Toyota names CFO Kenta Kon as new CEO amid profit decline — Toyota Motor announced CFO Kenta Kon will replace Koji Sato as CEO after the company reported a 43% drop in quarterly profit. Mr Sato will become vice chairman and focus on industry leadership roles including at JAMA and Keidanren. (insideevs.com)
- Keidanren business lobby invites activist fund Elliott for governance talks — Japan’s most powerful business federation Keidanren invited US activist investor Elliott Investment Management to a closed-door meeting on March 5 to discuss corporate governance issues, highlighting growing shareholder activism in Japan. (manilatimes.net)
- Ms Takaichi meets Nepal President, reaffirms democratic development support — Ms Takaichi met with Mr Paudel at her office, reaffirming Japan’s support for Nepal’s democratic development and regional stability. The meeting was part of celebrations marking 70 years of bilateral ties. (www3.nhk.or.jp)
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Indonesia
Indonesian stocks suffered their worst two-day selloff since the Asian Financial Crisis as international concerns mounted over President Prabowo Subianto’s state-directed economic model.
The crisis began when index provider MSCI warned about transparency issues and potential relegation of Indonesian stocks to frontier market status. Danantara, the sovereign wealth fund, scrambled to restore confidence by instructing asset managers to buy “fundamentally strong stocks,” but reports that the fund was considering takeovers of major gold mines only deepened investor anxiety. The panic reflected broader fears about institutional capture under Mr Prabowo’s presidency.
Even as markets tumbled, Danantara pressed ahead with an ambitious expansion, breaking ground on six major downstream projects valued at $7 billion across 13 regions. The projects span energy, mining, agriculture and poultry sectors, including aluminium smelters, biofuel refineries, and integrated poultry facilities expected to create 3,000 direct jobs and 1.46 million indirect jobs. The simultaneous market intervention and industrial expansion demonstrated both Danantara’s growing economic role and the mounting pressure on Mr Prabowo’s model.
International credit markets validated the concerns. Moody’s cut Indonesia’s credit rating outlook from stable to negative, citing reduced predictability in policymaking and concerns about governance. The agency specifically highlighted worries about Danantara and its potential impact on state finances.
Despite the economic turbulence, Mr Prabowo’s multi-alignment diplomacy continued unabated. He signed Indonesia onto President Donald Trump’s Board of Peace mechanism for Gaza conflict resolution, though former Deputy Foreign Minister Dino Patti Djalal confirmed Indonesia maintains the right to withdraw if the initiative conflicts with constitutional principles. The decision was described as pragmatic given it is currently the “only diplomatic option available” for Gaza peace efforts. Mr Prabowo also deepened ties with Australia, with Prime Minister Anthony Albanese announcing positions for senior Indonesian officers in Australian defence forces and expanded military education exchanges.
The economic pressure has not yet dented Mr Prabowo’s domestic standing. A new survey showed his approval rating at 79.9%, up from 78% in November — though the polling was conducted before this week’s market crisis. Coalition parties moved quickly to endorse him for a second term, with the National Mandate Party (PAN), National Awakening Party (PKB), and Party of Functional Groups (Golkar) voicing support. Former President Joko Widodo also backed the idea of a second Prabowo-Gibran administration. The Indonesian Democratic Party of Struggle (PDI-P), the main opposition party, maintained its measured stance, saying every party has sovereignty to determine its political position.
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- Indonesia and Australia sign new security treaty with defence cooperation expansion — Indonesia and Australia signed a security pact committing both countries to consult each other if either faces threats. Mr Albanese offered positions for senior Indonesian military officers to serve in Australian defence forces and announced support for joint training facilities. (reuters.com)
- Prabowo defends palm oil as ‘miracle crop’ amid criticism — Mr Prabowo called palm oil a ‘miracle crop’ and dismissed critics as complaining groups while advocating for expanded cultivation. He emphasised palm oil’s multiple uses from food to fuel, countering international criticism of the industry. (news.detik.com)
- Pertamina merges three downstream subsidiaries into single entity — State oil company Pertamina officially merged its three downstream subsidiaries - Pertamina Patra Niaga, Kilang Pertamina Internasional, and Pertamina International Shipping - to improve operational efficiency and strengthen national energy supply chains. (en.tempo.co)
- Moody’s downgrades Indonesia’s credit outlook to negative — Moody’s cut Indonesia’s credit rating outlook from stable to negative, citing reduced predictability in policymaking and concerns about governance. The agency highlighted concerns about the new sovereign wealth fund Danantara and its potential impact on state finances. (reuters.com)
- PDI-P holds opposition events and criticises government policies — Opposition party PDI-P organised various events including the Soekarno Run 2026 and criticised government policies on palm oil and conflict resolution. Party leaders maintained their opposition stance while defending their political positions. (nasional.kompas.com)
- Bank Indonesia undergoes leadership changes as Prabowo appoints new deputy finance minister — Mr Prabowo appointed former Bank Indonesia board member Juda Agung as deputy finance minister, following recent central bank reshuffles. The moves come amid market turmoil and concerns about central bank independence. (bloomberg.com)
- Prabowo criticises Bali government over waste crisis threatening tourism — Mr Prabowo strongly criticised Bali’s provincial government over the island’s worsening waste problem, warning it could undermine Indonesia’s tourism sector. He threatened to deploy military and police personnel if local authorities cannot act swiftly to address beach pollution. (channelnewsasia.com)
- Reports emerge of potential cabinet reshuffle under consideration — Cabinet Secretary confirmed Mr Prabowo is considering a cabinet reshuffle, though no specific timeline or positions were mentioned. The news comes amid ongoing policy implementations and market pressures. (investortrust.id)
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Indonesia stock market suffers major selloff amid MSCI concerns, Danantara intervenes
February 01-6, 2026
Indonesia joins Trump's 'Board of Peace' initiative for Gaza conflict resolution
February 02-6, 2026
Indonesia and Australia sign new security treaty with defense cooperation expansion
February 03-7, 2026
Bank Indonesia undergoes leadership changes as Prabowo appoints new deputy finance minister
February 02-5, 2026
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Taiwan
Taiwan’s silicon shield is eroding faster than expected as Taiwan Semiconductor Manufacturing Company (TSMC) advances cutting-edge chip production outside the island for the first time.
TSMC’s chief executive announced plans to upgrade the company’s second facility in Japan’s Kumamoto to produce advanced 3nm chips, with local media reporting a $17 billion investment. This marks a significant escalation from the original plan to produce older 6-12nm chips there. The decision, announced during meetings with Japanese Prime Minister Takaichi, means that for the first time, Taiwan’s most advanced semiconductor manufacturing will happen elsewhere. The move strengthens alliance ties with Japan while reducing global dependence on Taiwan-based production — exactly the dilemma the island has long feared.
Even as its economic leverage shifts, Taiwan maintains its established diplomatic balance. The opposition Kuomintang (KMT) resumed its separate-track engagement with Beijing, sending Vice Chairman Hsiao Hsu-tsen to lead a delegation for the first KMT-Chinese Communist Party forum since 2016. Mr Hsiao met senior Chinese officials including Wang Huning and reached consensus on AI cooperation and industrial exchanges, prompting criticism from Taiwan’s government. Meanwhile, President Lai Ching-te reinforced the island’s US alignment, announcing economic cooperation agreements including liquefied natural gas (LNG) purchases and AI collaboration following the sixth Economic Prosperity Partnership Dialogue. Mr Lai called bilateral relations “rock solid” despite a phone call between President Donald Trump and President Xi Jinping where Mr Xi urged careful handling of arms sales.
The domestic institutional crisis grinds on without resolution. Taiwan’s opposition-controlled legislature continues blocking Mr Lai’s defence budget while the executive refuses to countersign opposition legislation. The deadlock maintains established patterns of constitutional confrontation without escalation or breakthrough.
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- Opposition parties block Taiwan’s defence budget as US senators criticise delay — Taiwan’s opposition-controlled legislature continues blocking President Lai’s New Taiwan dollar (NT$) 1.25 trillion special defence budget, with the Taiwan People’s Party (TPP) advancing an alternative NT$400 billion proposal. US senators publicly criticised the KMT and the TPP, calling their stance ‘playing with fire’ amid China’s military threats. (bloomberg.com)
- China-born legislator Li Zhenxiu sworn in for TPP amid nationality controversy — Li Zhenxiu, a naturalised Taiwanese citizen born in China, was sworn in as a TPP legislator-at-large despite ongoing controversy over her nationality status. Critics raise security concerns about a Chinese national gaining access to classified legislative information. (focustaiwan.tw)
- Hong Kong media tycoon Jimmy Lai sentenced to 20 years in prison — Hong Kong media mogul Jimmy Lai was sentenced to 20 years in jail for conspiring to collude with foreign forces and publishing seditious materials, ending the city’s biggest national security case. The sentencing drew international criticism and concerns about press freedoms in Hong Kong. (abcnews.go.com)
- Taiwan announces Han Kuang 42 military exercises for August — Defence Minister Wellington Koo announced Taiwan will conduct its Han Kuang 42 military exercises for 10 days in August, focusing on decentralised command capabilities, urban resilience, and live-fire operations. The drills will integrate with local government air raid exercises. (taiwannews.com.tw)
- Premier Cho refuses to sign veteran village relocation legislation — Premier Cho Jung-tai refused to countersign opposition-passed legislation for relocating 50 veteran village households to defence ministry housing, citing constitutional concerns about case-specific legislation that would benefit particular firms and people at public expense. (focustaiwan.tw)
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South Korea
President Lee Jae-myung is flexing his strengthened political authority to extract concrete economic commitments from Korea’s business elite, with his approval rating hitting 63% — near his post-inauguration peak — as he launches an aggressive campaign against real estate speculation.
Mr Lee hosted the chairmen of Samsung, SK, Hyundai, LG and other major chaebol at the presidential palace, securing pledges for 300 trillion won in regional investments over five years and 51,600 new hires in 2026. Samsung alone committed to 450 trillion won in domestic investment, including research and development (R&D), and 60,000 Korea-based hires over five years. Mr Lee framed the meeting as ensuring the “fruits of growth spread evenly” to regions and youth — a direct use of presidential platform to coordinate business investment beyond typical market mechanisms. The commitments came as his approval rating rose four percentage points to 63% in the latest National Barometer Survey, his highest level in six months. (Korea Herald, multiple dates)
Even as he courted business leaders, Mr Lee intensified his signature policy fight against property speculation. He vowed through social media warnings and Cabinet orders to make holding multiple properties “impossible,” giving multi-homeowners a “last chance” before May 10 tax break reinstatement. When his finance minister used the word “maybe” twice in policy discussions, Mr Lee rejected the equivocation, demanding certainty in implementation. He warned that failure would impact governance “for the remaining four years” — rhetoric that received prominence across 17 news sources, indicating both high political stakes and Mr Lee’s confidence in his mandate. (Bloomberg, Korea Herald, 2026-01-18 to 2026-01-22)
The assertive domestic posture comes as South Korea’s alliance management faces new institutional friction. The US House Judiciary Committee issued a subpoena to e-commerce giant Coupang and opened an investigation into the Korea Fair Trade Commission and other agencies for allegedly subjecting American firms to “punitive obligations, excessive fines, and discriminatory enforcement practices.” The investigation aims to inform potential legislation protecting US companies from foreign discriminatory regulations — representing a test of whether the transactional alliance framework established at the October 2025 Gyeongju summit can manage regulatory sovereignty disputes.
Financial markets reflected external pressures this week, with the Korea Stock Price Index (KOSPI) falling 5.26% below the 5,000 threshold and triggering circuit breakers. Samsung Electronics dropped 6.29% and SK Hynix fell 8.69%, attributed to global “Warsh Shock” expectations of slower Federal Reserve rate cuts. But domestic confidence held: foreign investors recorded net sales exceeding 2.2 trillion won while individual investors defended the index with 4.5 trillion won in net purchases. The retail investor support suggests confidence in the government’s economic management remains intact despite external volatility.
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- Major South Korean crypto exchange accidentally distributes $40 billion in bitcoin — Bithumb, one of South Korea’s largest cryptocurrency exchanges, mistakenly sent over $40 billion worth of bitcoin to customers as promotional rewards due to employee error. The exchange recovered 99.7% of the funds within hours and restricted trading for affected customers. (bbc.com)
- President Lee faces ongoing legal proceedings on multiple fronts — Mr Lee dealt with several legal issues including accusations of prosecution evidence tampering in the Wirye New Town case, criticism over prosecution appeals, and asset seizures in a development scandal case. Mr Lee also appointed an opposition-recommended special prosecutor to investigate former President Yoon Suk-yeol. (chosun.com)
- South Korean financial markets experience volatility amid global pressures — Korean markets faced multiple pressures including the KOSPI falling below 5,000 and triggering circuit breakers, Bank of Korea managing currency volatility, and concerns over Korean retail investors’ record $171 billion holdings in US stocks affecting foreign exchange stability. (fxstreet.com)
- Samsung ends software support for Galaxy S21 flagship phones from 2021 — Samsung officially discontinued software updates for its Galaxy S21 series phones launched in 2021, fulfilling its four-year update promise. The S21, S21+, and S21 Ultra will no longer receive major Android updates or security patches, though the S21 FE continues to receive support. (notebookcheck.net)
- President Lee warns against stock manipulation amid reporter probe — Mr Lee issued strong warnings against stock manipulation, linking his comments to an ongoing investigation into alleged advance trading by financial journalists. Mr Lee emphasised zero tolerance for market manipulation that undermines order. (upi.com)
- South Korea advances stablecoin legislation framework — South Korea’s Digital Asset Basic Act, including legal framework for stablecoin issuance, is expected to pass in the first quarter of 2026. The legislation would authorise Korean won-backed stablecoins for the first time, ending nine years of prohibition on local cryptocurrency launches. (koreatechdesk.com)
- Police investigate former presidential chief of staff in martial law probe — Police questioned former presidential chief of staff Chung Jin-suk over his alleged role in Mr Yoon’s brief martial law declaration in late 2024. Mr Chung attended Cabinet meetings before and after the decree was imposed. (koreatimes.co.kr)
- People Power Party plans name change and leadership restructuring — The opposition People Power Party is targeting March 1 to unveil a new party name as part of broader reforms. The party is also centralising nominations and replacing local chapter heads, including those from pro-Han factions opposing current leadership policies. (biz.chosun.com)
Notes
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President Lee Jae-myung launches aggressive campaign against real estate speculation
February 01-5, 2026
President Lee meets major conglomerate leaders to push youth employment and regional investment
February 04-5, 2026
Major South Korean crypto exchange accidentally distributes \$40 billion in bitcoin
February 07-8, 2026
US Congress investigates South Korean regulators over alleged discrimination against American tech companies
February 05, 2026
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Australia
Australia became the first major economy to reverse post-pandemic monetary easing this week as the Reserve Bank of Australia (RBA) raised interest rates for the first time since 2023.
The RBA implemented a 25 basis point increase to 3.85%, driven by inflation rising to 3.8% well outside the 2-3% target. Governor Michele Bullock indicated further rate rises remain possible, with the bank projecting headline inflation to reach 4.2% by mid-year. The decision makes Australia unique among major economies, all of which have maintained or cut rates since the pandemic.
Even as it tightens monetary policy at home, Australia is deepening its regional ties while facing new uncertainty about its most important alliance. Prime Minister Anthony Albanese and Indonesian President Prabowo Subianto signed the Australia-Indonesia Treaty on Common Security, described by government sources as representing the strongest bilateral relationship ever. The agreement establishes embedded officer positions, joint training facilities, and expanded military education exchanges.
But questions have emerged about the centerpiece of Australia’s alliance with the United States. A US Congressional Research Service report examined alternatives to selling Virginia-class submarines to Australia under AUKUS, including the option of the US Navy retaining the boats and operating them from Australian bases. The report cited Australia’s refusal to commit to supporting the US in a potential Taiwan conflict as rationale for reconsidering submarine sales.
The government is also rationalizing its defense estate to fund modernization. Defence Minister Richard Marles announced the sale of 67 defense sites including Victoria Barracks to unlock up to $1.8 billion for Australian Defence Force upgrades. An audit found large swathes of the 3-million-hectare estate were no longer necessary, with many facilities deteriorated beyond economical repair.
Mr Albanese continues to benefit from opposition dysfunction. Liberal Party leadership tensions intensified with Angus Taylor positioned for a potential challenge against Sussan Ley, while the Coalition temporarily split from the Nationals over disagreements before reuniting. Newspoll shows the Coalition’s primary vote has collapsed to 18% — behind One Nation at 27%. Ms Ley’s net approval rating fell to -39, the worst for any party leader in over two decades.
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- Liberal Party leadership crisis and Coalition reunion after split with Nationals — Angus Taylor positioned for a potential leadership challenge against Liberal leader Sussan Ley amid polling showing the Coalition falling behind One Nation. The Liberal-National Coalition temporarily split over disagreements but reunited after negotiations. (dailymail.co.uk)
- Israeli President Isaac Herzog’s visit sparks controversy over Gaza war — Mr Albanese invited Israeli President Isaac Herzog to visit Australia following the December antisemitic attack in Bondi. The visit has drawn strong opposition from Palestinian Australians and critics who view it as inappropriate during the Gaza conflict. Foreign Minister Penny Wong defended the decision. (theguardian.com)
- Albanese signs defense pact with Indonesia — Mr Albanese travelled to Jakarta where he signed a new defense cooperation agreement with Indonesian President Prabowo Subianto. Mr Albanese described the treaty as “very significant” and indicated Australia would assist Indonesia in developing defense training infrastructure. (theguardian.com)
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Liberal Party leadership crisis and Coalition reunion after split with Nationals
February 01-8, 2026
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