Japan's ruling party picked conservative nationalist Sanae Takaichi as its head on Saturday, putting her on course to become the country's first female prime minister in a move set to jolt investors and neighbours.

Takaichi has been a vocal advocate of "Abenomics", a hefty mix of government spending and monetary stimulus deployed by her mentor, then-premier Shinzo Abe, to pull Japan out of deflation and ease the pain of a surging yen on the export-reliant economy.

Sanae Takaichi has been elected as the new leader of Japan's ruling party and is all set to become the first woman Prime Minister of the country., Asia, Times Now

While the world's fourth-biggest economy is already experiencing inflation, it is premature to declare it fully out of stagnation as recent price rises have been driven by high raw material costs, said Takaichi, set to be Japan's first female premier after winning a ruling party leadership race.