Japan Inc. Signals Cautious Optimism Under Prime Minister Takaichi
Japanese businesses are broadly positive about the outlook under newly installed Prime Minister Sanae Takaichi, even as concerns over political stability and China relations temper enthusiasm. A recent corporate survey shows confidence strengthening on the back of policy commitments to boost investment in AI, semiconductors, quantum computing, and other strategic technologies.
Around 43% of companies expect business conditions to improve under Takaichi’s leadership, while only 3% anticipate deterioration. Executives point to her growth-first agenda and fiscal pragmatism as supportive for domestic demand and capital spending. Yet the administration’s minority status leaves nearly half of firms wary of political instability that could slow or complicate policy delivery.
Geopolitical risk is another major headwind. About 42% of respondents cite tensions with China as a significant concern, heightened by recent commentary around potential responses to a Taiwan contingency. Despite the external risks, wage dynamics remain firm: 72% of companies plan to raise pay next year at roughly the same pace as in 2024—when Japan recorded its largest pay increases in 34 years amid acute labor shortages. Persistent wage momentum points to sticky services inflation, a key consideration for the Bank of Japan as it calibrates its monetary policy path in the face of global trade frictions and geopolitical uncertainty.
Key Points – 43% of Japanese firms expect better business conditions under Prime Minister Sanae Takaichi; 3% foresee deterioration. – Policy priorities include investment in AI, semiconductors, and quantum computing to drive growth. – Nearly half of companies flag political instability risks tied to the government’s minority status. – 42% cite strained relations with China as a key business risk, amid heightened Taiwan-related tensions. – 72% plan to lift wages at a similar pace to 2024, sustaining wage-driven domestic demand. – Steady pay growth implies sticky inflation, keeping the Bank of Japan focused on wage trends when setting policy.
