Coalition deal puts Takaichi on brink of becoming Japan's first female PM

"I told Takaichi that we should move forward together," Ishin's leader and Osaka governor Hirofumi Yoshimura told reporters in the western Japanese city on Monday. He will meet with Takaichi at 6 p.m. (0900 GMT) to conclude the alliance, he added.

The coalition deal included deadlines and specific plans for policy implementation, including a 10% reduction in lawmaker numbers, Ishin's other boss, Fumitake Fujita said after he and Yoshimura met with party lawmakers to outline the coalition agreement.

Investors' anticipation of a deal that could lead to higher government spending weakened the yen and pushed stocks in Japan to a record high, with the blue-chip Nikkei share index closing 3.4%higher.

The cooperation agreement would deliver a combined 231 seats in parliament's dominant lower house. It would fall two short of a majority, but ensure Takaichi likely wins a vote in parliament on Tuesday to pick Japan's next prime minister. She will only need a majority of ballots cast rather than of all members in any runoff vote.

To govern, however, she will still need to court the support of other opposition groups, including for an upcoming supplementary budget.

The expected deal with Ishin follows the collapse of the LDP's 26-year coalition with Komeito, which ended its alliance after the ruling party picked Takaichi as its new leader.

Komeito's abrupt withdrawal triggered talks among opposition parties, including the second largest Ishin, that could have derailed her premiership ambitions and thrown her party out of power for the first time in more than a decade. Ishin's decision to side with the LDP ends that possibility.

FISCAL DOVE, SECURITY HAWK

Takaichi, a fiscal dove, has called for higher spending and tax cuts to cushion consumers from rising inflation and has criticised the Bank of Japan's decision to raise interest rates.

"Expectations for Takaichi's economic policies, which include fiscal expansion and monetary easing, appear to be facilitating rising share prices and a weaker yen," said Nomura Securities strategist Fumika Shimizu.

Some analysts say Ishin, which advocates for small government and spending cuts, could restrain some of Takaichi's spending ambitions.

Takaichi wants to revise Japan's pacifist postwar constitution to recognise the role of its military. A regular visitor to the Yasukuni war shrine in Tokyo, viewed by some Asian neighbours as a symbol of wartime aggression, she wants higher defence spending to deter neighbouring China.

She has also called for stricter immigration rules and opposes social policies, such as allowing women to retain their surnames after marriage, which she says undermine traditional values.

For now, Ishin will not take up a post in Takaichi's government, at least until it is clear that the partnership with the LDP is working, Yoshimura said later in a television interview.

"Right now, we're still a group of lawmakers with no experience in government. So rather than asking for a ministerial post, we want to first focus on realising our policies as part of the ruling coalition," he said.