Prime Minister Sanae Takaichi Highlights Economic Reforms in New Year Message and Supports Small Business Wage Increases with New Trade Law

Prime Minister Sanae Takaichi’s New Year Message

On January 1, 2026, Prime Minister Sanae Takaichi shared her New Year’s reflections, addressing key domestic challenges like population decline and rising living costs. She also pointed out global uncertainties, including shifts in international order and economic instability, emphasizing the need for proactive reforms.

She expressed her commitment to “embracing change and pushing forward necessary reforms”. Takaichi vowed to create a stronger economy along with robust diplomacy and national security, inspiring hope for the future.

Implementation of the New Trade Law for Small Businesses

Starting January 1, a new law called the “Fair Trade Act for Small and Medium-Sized Enterprises” (FTASME) came into effect. This law amends existing regulations to promote fair trade practices and support wage increases among small businesses, protecting their interests and ensuring fair dealings with larger corporations.

This legislation aims to curb unfair price-cutting pressures from big companies, helping small firms improve profitability. Strengthening wage growth foundations is a key goal.

Bank of Japan’s Monetary Policy Normalization

The Bank of Japan raised its policy interest rate to 0.75% at its December 2025 meeting — the highest in nearly 30 years — signaling a recovery in economic fundamentals.

Going forward, gradual rate hikes aimed at reaching a neutral rate are expected, which should help curb yen depreciation and inflation. The impact of U.S. tariffs on the real economy remains limited.

Key Economic Highlights

• Continued Capital Inflows: Around $62 billion flowing into stocks and bonds
• Fiscal Challenges: Urgent need to establish sustainable fiscal policies
• Growth Outlook: Experts forecast growth rates in the high 0% to low 1% range for 2026

Expert Predictions Summary

A survey of 10 economic experts conducted by Diamond magazine predicts the Bank of Japan’s interest rate will reach an average of 1.45%. Opinions vary on whether inflation will slow down or stabilize around 2%.

The Takaichi administration’s economic policies, dubbed “Sanaenomics,” are gaining recognition, especially for strategies to foster growth amid population decline.

The Future of Japan’s Economy

Despite uncertainties surrounding U.S. tariff policies, Japan’s economy is showing signs of resilience. Normalization of monetary policy and fiscal reforms are expected to be key drivers of growth.

The new trade law is likely to boost wage increases mainly among small and medium-sized businesses. Prime Minister Takaichi’s push for reform could energize the economy and promote business vitality.