In upheaval: stimulus boost, yen weakness and monetary policy considerations

Japan offers interesting opportunities – particularly in the export-oriented sector, given the favourable currency environment – but at the same time volatility is increasing due to currency and interest rate fluctuations and fiscal uncertainty. A key decision-making factor will be how quickly and strongly monetary policy is normalised without overburdening the fragile domestic situation. Japan belongs in a diversified portfolio as an investment.

Japan is currently facing a complex mix of strong fiscal stimulus, currency pressure and a balancing act in terms of monetary policy. At the beginning of November, the new government under Sanae Takaichi approved a huge economic stimulus package worth around 21.3 trillion yen (≈ US$ 135 billion) with the aim of boosting economic growth and cushioning the rising cost of living. At the same time, the yen weakened noticeably, which could support exports - but at the same time harbors import and inflation risks.

Bank of Japan CEO Kazuo Ueda emphasized in a meeting with the government that although monetary policy normalization is in sight, it must be "gradual and data-dependent" - especially in light of the fact that Japan has not yet achieved sustainable, wage-driven inflation. In addition, the government and central bank have jointly stated that they are monitoring the markets with a "strong sense of urgency", particularly given the weakness of the yen and a restrictive global environment.

Macroeconomically, the economy continues to show signs of a slowdown: The build-up of domestic demand remains fragile and dependence on external stimuli is growing. Imported inflation due to the weaker yen and fiscal burdens from the large stimulus program are additional risk factors.

Expected GDP 2026 0.6%
Expected inflation 2026 1.7%
Japanese key interest rate 0.81%

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

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

_{Status:24.11.2025}