Economic dynamics

The Japanese economy is currently showing a mixed picture. The OECD is forecasting real GDP growth of only around +0.70% in 2025 and a moderate +0.40% in 2026. The first quarter of 2025 even saw a mini recession, mainly due to weak export data as a result of US tariff policy. Domestic demand, on the other hand, is being supported by solid wage growth.

Inflation & monetary policy

The Bank of Japan raised its interest rate to 0.50% at the beginning of the year - the first time it has been in positive territory for decades. However, Governor Ueda makes it clear that underlying inflation is still below 2.00%, which is why further interest rate moves will be very cautious. BOJ member Takata is already in favour of continuing the normalization if inflation consolidates. The yen is still on a weak course, at over 140 ¥/USD, which benefits exporters but makes imports more expensive.

Corporate and financial market sentiment

Despite global uncertainties, Japanese industrial companies are slightly more optimistic according to the BOJ survey, with a sentiment index of +13. Analysts are also positive about the stock markets: Nikkei forecasts are +5.00% by the end of the year (≈39,600 points) and a return to new all-time highs in 2026. Structural reforms - improvements in corporate governance, significant share buybacks - are further boosting confidence.

Expected GDP 2025             0.70%
Expected inflation 2025       2.40%
Japanese key interest rate  0.50%

Mimi Haas, Lic. rer.pol. HSG, M.A. in Banking and Finance HSG, Partner

_{Sources: OECD, Bank of Japan and IMF}

‍^{As at: 07.07.2025}