In 2026, the Japanese economy fully broke free from the structure of the “Lost 30 Years” and entered a new phase.
However, what awaited beyond was not peaceful growth, but the harsh reality of adapting to a “world with interest rates” and responding to turbulent “global political risks.”
This report delves into the key topics shaping Japan’s economy in 2026, revealing the risks and opportunities we now face.
- A Major Shift After 17 Years: The Impact of a “World with Interest Rates” on Society
- The Normalization of Geopolitical Risks and Supply Chain Restructuring
- Trade Frictions and the Threat of IEEPA Under the Second Trump Administration
- As of 2026, even allies including Japan have not been spared its impact.
- Strategic Perspectives for Surviving 2026
- Summary: Treat Change as a “Premise,” Not a “Risk”
A Major Shift After 17 Years: The Impact of a “World with Interest Rates” on Society
In January 2025, the Bank of Japan’s decision to raise its policy interest rate to 0.5% marked a major milestone in Japan’s financial history.
With interest rates, which had remained near zero (or negative) since the 2008 Lehman Shock, finally beginning to move, the very structure of society is poised for fundamental change.
The Entrenchment of Rising Prices and Shifting Mindsets
The consumer price index (CPI), which temporarily reached 4%, is currently hovering around 2%.
This is not merely cost-push inflation but part of a transition toward “moderate inflation” accompanied by wage growth.
Impact on Households
While rising deposit interest rates benefit savers like the elderly, borrowers with variable-rate mortgages face the risk of higher repayments.
Impact on Businesses
The era of “free borrowing” has ended. Management focused on capital efficiency (such as improving ROE) is now demanded more rigorously than ever before.
The Normalization of Geopolitical Risks and Supply Chain Restructuring
The biggest “anchor” holding back Japan’s economic recovery is the seemingly endless geopolitical tensions.
The dual burden of energy and logistics
Energy prices remain stubbornly high and volatile due to the ongoing tensions in the Middle East, compounded by the deadlock in Ukraine.
Increased Logistics Costs
Route changes necessitated by situations like the Red Sea crisis have led to longer transit times and higher container freight rates, directly driving up import prices.
Strengthening Economic Security
The era of “buying from anywhere if it’s cheap” has ended.
The shift towards “friend-shoring”—completing supply chains within countries sharing common values—is accelerating. The associated costs of relocating production bases are squeezing corporate profits.
Trade Frictions and the Threat of IEEPA Under the Second Trump Administration
The Trump administration, which returned to power in 2025, is pursuing an unprecedentedly hardline trade policy.
As of 2026, even allies including Japan have not been spared its impact.
The True Nature of Trump Tariffs
The Trump administration’s blanket tariffs and high duties on specific items cast a significant shadow over Japan’s core industries, such as automobiles and semiconductors.
Utilization of IEEPA (International Emergency Economic Powers Act)
This law, which grants the U.S. President broad authority, is frequently invoked on national security grounds.
This has normalized the risk of sudden restrictions on trade with specific countries or companies, forcing Japanese firms to operate in an extremely uncertain business environment where “the rules could change tomorrow.”
Shaking Up the Foreign Exchange Market
The resurgence of a “strong dollar,” driven by expectations of U.S. tariff and fiscal policies, is accelerating yen depreciation and further pushing up Japan’s import costs.
Strategic Perspectives for Surviving 2026
In this era of uncertainty, how should companies and individuals respond?
Defense and Offense for Companies
While strengthening defenses against refinancing risks associated with rising interest rates, companies must simultaneously advance cost reductions through supply chain digitalization (DX) and the development of high-value-added products (offense).
Asset Protection for Individuals
In an environment where inflation and rising interest rates occur simultaneously, the value of cash diminishes relatively.
Proactive asset management is essential, such as diversified investing using tools like NISA and reallocating assets to financial instruments resilient to rising interest rates.
Summary: Treat Change as a “Premise,” Not a “Risk”
Japan’s economy in 2026 will show nominal GDP growth on the surface, yet its underlying structure is in the midst of intense transformation.
Rather than viewing “rising interest rates” and “geopolitical risks” as temporary disruptions, accepting them as the “new normal” may be the first step toward sustainable growth.
