Prime Minister Takashi’s Call for House Dissolution Sparks Sharp Rise in Nikkei, BOJ Overcapacity Concerns, and US-South Korea Economic Security Talks

Stock Market Surges After Reports of Prime Minister Takashi Considering House Dissolution

Following reports that Prime Minister Sanae Takashi is considering dissolving the House of Representatives, Japanese stocks jumped significantly. The Nikkei 225 index opened up by 868 points to 52,808, fueled by optimism over political stability and policy momentum[2][1].

Kawasaki Heavy Industries shares briefly hit a 10.1% high at 13,615 yen, marking a new high for the year. This rally was driven by expectations of accelerated defense-related policy developments[2].

• Yaskawa Electric dipped 2.1% to 4,921 yen, reflecting sluggish auto-related investments and a 44% drop in Q3 net profit[2].
• The Nikkei futures soared over 1,700 yen compared to the previous day, indicating strong hopes for government stability[1].

Bank of Japan Highlights Excess Supply in Japan’s Economy

The Bank of Japan’s latest report shows that Japan’s economy continues to face weak demand, leading to an excess of supply capacity. While prices should be falling, the yen’s weakness is keeping inflation high[1].

Real wages in November have declined for 11 straight months. Meanwhile, nominal wages have increased for 47 consecutive months but still lag behind rising prices[1].

US-South Korea Summit Confirms Strengthened Economic Security Cooperation

During the January 13 summit, Prime Minister Takashi and President Lee Jae-myung agreed to boost collaboration in economic security. They discussed deepening supply chain cooperation to address regional challenges[3].

With concerns over China’s potential export restrictions on rare earth minerals, both countries reaffirmed their roles in maintaining regional stability. President Lee remains cautious about mediating China-Japan tensions[3].

Other Key Economic Developments

JTB forecasts that inbound tourism will decline slightly in 2026, with visitor numbers dropping 2.8% year-over-year to 41.4 million, based on Tourism Agency data[1].

Regarding Japan’s Self-Defense Forces, most opinions favor maintaining the current level of military activity[1].