Japanese companies are broadly upbeat about the business outlook under new Prime Minister Sanae Takaichi, though many still worry about the risks posed by her minority government, according to a Reuters corporate survey. About 43% of firms expect business conditions to improve under Takaichi’s leadership, compared with just 3% who see deterioration. The new prime minister, Japan’s first female leader and a fiscal dove, has pledged to drive growth through investment in AI, semiconductors, quantum computing and other strategic technologies.
However, nearly half of surveyed firms flagged political instability as a key risk, while 42% pointed to strained relations with China — tensions sharpened recently after Takaichi suggested that Japan could respond militarily if China attacked Taiwan.
On wages, companies appear set to maintain this year’s momentum. 72% plan to raise pay at roughly the same pace next year as the 2024 cycle, which delivered the biggest increases in 34 years amid severe labour shortages. Still, some firms expect smaller or larger adjustments depending on hiring conditions. The findings come as the Bank of Japan watches closely for evidence that wage growth will remain firm as U.S. tariffs and geopolitical tensions add pressure to Japan’s economic outlook.
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Corporate optimism and steady wage intentions support Japan’s near-term domestic demand outlook, though political instability and China-related risks could temper investment appetite. For markets, the survey reinforces expectations of continued wage-driven inflation stickiness — a key variable for the BOJ’s policy path.
This article was written by Eamonn Sheridan at investinglive.com.
