Prime Minister Takashi Emphasizes Economic Reforms in New Year’s Message and Implements Law to Support Small Business Wage Growth

Prime Minister Takashi’s New Year’s Message

On January 1, 2026, Prime Minister Sanae Takashi delivered her New Year’s address, reaffirming her commitment to “embrace change and push forward necessary reforms” with determination.

She highlighted challenges Japan faces, like declining population and rising living costs, while pointing out global uncertainties in politics and the economy. She outlined plans to strengthen the economy and enhance diplomatic and security efforts through bold reforms.

In her New Year’s pledge, she emphasized, “Let’s make Japan stronger and more prosperous, creating hope for our future.”

Implementation of the Small Business Support Law

Starting January 1, a new law called the Small Business Fair Contract Act (SBFA) officially took effect, aimed at encouraging small and medium-sized businesses to raise wages.

This law is designed to protect the interests of small businesses by promoting fair trading practices and preventing unfair treatment by larger parent companies. It’s expected to help secure funding for wage increases and improve working conditions.

Latest Trends in Japan’s Economy

In 2025, the Bank of Japan raised its policy interest rate to 0.75%, the highest in nearly 30 years, signaling signs of overcoming deflation.

While U.S. tariffs have had limited impact, Japan’s economy is experiencing some growth momentum. However, maintaining fiscal sustainability remains a key challenge.

• Capital Inflows: Continued inflow of approximately $82 billion into stocks and bonds, maintaining a positive trend
• Monetary Policy: Gradual normalization toward neutral interest rates is necessary
• Fiscal Challenges: Urgent need to outline strategies to avoid credit rating downgrades

What to Watch Next

Under Prime Minister Takashi’s leadership, economic growth strategies amid a shrinking population are in focus. Experts predict that Japan’s GDP growth in 2026 will likely stay in the low 0% range, slightly below the previous year.

Discussions are also ongoing about slowing inflation and the Bank of Japan’s current average interest rate of around 1.45%. Investors and policymakers are eager to see how Takashi’s bold reforms will influence Japan’s economy.