Bank of Japan Reports Excess Supply in Japan’s Economy
On January 13th, the Bank of Japan announced that Japan’s economy is facing a persistent surplus of goods and services, indicating weak demand across the board. Normally, this would lead to falling prices, but due to the yen’s depreciation, inflation — especially for food and everyday essentials — continues to climb, preventing prices from stabilizing.
Real Wages Decline for 11 Consecutive Months
There’s also been a clear deterioration in workers’ earnings. Real wages in November have fallen for the 11th straight month, meaning wages aren’t keeping up with rising living costs. Meanwhile, nominal wages — the total cash paid out — increased by 0.5% year-over-year to ¥312,202, marking 47 months of continuous growth. However, the purchasing power of those wages is still shrinking.
Stock Market Surges on Rumors of Prime Minister Dissolving Parliament
Following reports that Prime Minister Sanae Takaichi is considering dissolving the House of Representatives, Japan’s stock market shot up sharply. The Nikkei index jumped by 868 points to close at 52,808, marking a big rally. Investors are optimistic about political stability and accelerated policy initiatives.
Defense stocks led the charge, with Kawasaki Heavy Industries soaring to a high of ¥13,615 — up 10.1% — hitting its highest level in over a year. This rally reflects expectations that Prime Minister Takaichi will push forward with her defense strengthening plans. Additionally, robotics and AI-related stocks gained attention, as the government’s growth strategy prominently features “Physical AI,” boosting related companies.
On the flip side, Yaskawa Electric fell 2.1% to ¥4,921. The company’s profits declined due to sluggish auto-related capital spending, impacted by U.S. tariffs during the Trump administration. Its net income for the third quarter of fiscal 2026 was down 44% year-over-year to ¥25.5 billion, leading to a sell-off.
Japan and South Korea Leaders Confirm Cooperation on Economic Security
On the same day, Prime Minister Takaichi met with South Korean President Lee Jae-myung. The two leaders discussed strengthening supply chain cooperation in the field of economic security and agreed on the importance of working more closely together. With China considering export restrictions on rare earths and other critical materials, enhanced Japan-South Korea collaboration is seen as a key move toward regional economic stability.
Inbound Tourism Forecast Drops by 3%
The tourism industry faces challenges ahead. JTB projects that the number of inbound visitors to Japan in 2026 will decrease by 2.8% year-over-year to 41.4 million travelers. This forecast is based on booking trends from the Japan Tourism Agency, the Japan National Tourism Organization, and JTB Group data.
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