Prime Minister Takashi’s Economic Outlook
Prime Minister Sanae Takashi is forecasting a **3.4% nominal GDP growth** in 2026, along with a 1.3% rise in real wages. [1] She emphasizes bold government spending focused on investment to drive this positive outlook.
During a New Year’s celebration with business leaders, the Finance Minister called for a “**record-breaking surge**,” expressing optimism about Japan’s economic momentum. [1]
Bank of Japan Rate Hike and Market Trends
The Bank of Japan raised its policy interest rate by **0.25%** at its December meeting, citing strong corporate wage increases and a weakening yen. [1] Investors are watching to see if market confidence in Takashi’s proactive fiscal policies will grow.
Since Takashi’s administration took office, the yen has depreciated and long-term interest rates have climbed, breaking through the 2% mark. [2]
China’s Export Restrictions and Their Impact
China has tightened export controls on military and dual-use items, raising concerns about supply chain disruptions for Japan. [4][5] Building a resilient supply network for rare earth elements is now more urgent than ever.
The G7 finance ministers’ meeting kicks off on the night of the 12th Japan time, with Finance Minister Katayama attending. They will discuss reducing dependence on China for critical supply chains. [5]
- Discussing stable supply of rare earths, which are dominated by China
- Japan’s position to be explained by Finance Minister Katayama
Impact of Reduced Chinese Tourism on Japan’s Economy
In November, the number of Chinese tourists visiting Japan increased by only **3%** year-over-year, reflecting the ongoing impact of deteriorating Japan-China relations. [2] Concerns are rising about how December’s figures and Chinese travel restrictions could affect Japan’s overall economy.
The combination of overtourism and travel restrictions from China is putting pressure on the tourism industry, sparking discussions about potential setbacks. [2]
Budget Plans and Political Developments
The 2026 fiscal year budget proposes defense spending of **about 9 trillion yen, up 3.6%**, and international aid totaling **10.8% more at 31.28 trillion yen**. [2] Delays in passing the budget could impact everyday life for Japanese citizens. [3]
Prime Minister Takashi is also considering dissolving the lower house early in the upcoming session to push forward her economic agenda, signaling strong political momentum. [4]
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