Why the bond vigilantes are right about Japan's election
William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."
After 290 days in office, Shigeru Ishiba's government is being hit with a perfect storm of tariffs, inflation and budget troubles.
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Japan Times
an hour ago
- Japan Times
Amid inflation, Japanese government panel proposes record ¥63 minimum wage hike
A government panel has recommended a record hike of ¥63, or 6%, for the average minimum hourly wage in the country for fiscal 2025, up from the previous year's proposal of a ¥50 increase. The recommendation made Monday by the Central Minimum Wages Council, which advises the labor minister, would raise the average minimum wage to ¥1,118 per hour, with hourly pay likely exceeding ¥1,000 in all 47 prefectures. The recommended hike reflects the rising prices of rice and other goods. Based on the proposal, the prefectures' individual councils will make their own decisions, and the new wages will apply from early October. To compile the latest minimum wage proposal, the government council sorted the 47 prefectures into three groups based on their economic strength. It set the proposed hike at ¥63 for group A, which includes Tokyo, Osaka and four other prefectures, while group B consists of 28 prefectures, including Hokkaido, Fukushima, Ishikawa and Hyogo. Despite having weaker economies than the other two groups, group C, made up of the remaining 13 prefectures, was advised to implement a ¥64 wage increase in an effort to rectify wage differences with other regions and address serious labor shortages. Among the 13 are Aomori, Iwate, Kochi and Kagoshima. If the prefectural councils implement hikes as recommended by the central government council, all 31 prefectures whose minimum hourly wages are below ¥1,000 would see the floor wage exceed the level. The central government council raised concerns about the rising prices of goods and services, which are weighing on household finances. According to the nation's consumer price data, food prices surged an average of 6.4% year on year in the period between October 2024 and June 2025. Prices of goods and services purchased about once a month, including electricity bills, went up 6.7%. The council's decision also reflected the pay hikes agreed to in this year's labor-management wage negotiations. A subcommittee of the council held a total of seven meetings to discuss the fiscal 2025 minimum wage recommendation, the first time in 44 years that so many meetings have taken place, as it coordinated the exchange of views between the labor and management sides. The council's latest proposal, however, fell short of the 7.3% annual increase needed for the central government to achieve its target of raising the nation's minimum hourly wage to ¥1,500 on average in the 2020s. The government has been providing support, including subsidies, to prefectures implementing hikes beyond the council's recommendations. "We'll continue to take every possible measure to support management reform and wage hikes, including at small companies and micro-businesses," Prime Minister Shigeru Ishiba told reporters Monday after the panel meeting. "The basic idea that wage hikes are the cornerstone of a growth strategy and related efforts are spreading steadily and bearing fruit," Ishiba said. He also said that the government will intensively support prefectures that conduct wage increases surpassing the levels recommended by the central council. "We are determined to make further efforts," Ishiba said in reference to the ¥1,500 goal. "The target can be attained once our measures yield positive results."
Japan Times
an hour ago
- Japan Times
Japan's 5 largest banking groups post 2.7% profit gains for April-June
The combined group net profits of Japan's five major banking groups in April-June increased 2.7% from a year earlier to ¥1.375 trillion ($9.34 billion), due partly to growth in income from their lending operations reflecting interest rate hikes by the Bank of Japan, according to their earnings reports released by Monday. Net profit grew 1.5% to ¥376.8 billion at Sumitomo Mitsui Financial Group, 0.4% to ¥290.5 billion at Mizuho Financial Group and 36.2% to ¥90.8 billion at Sumitomo Mitsui Trust Group. The three groups' April-June profits are the highest since they were established. Resona Holdings' net profit grew 27.3% to ¥70.5 billion in the first quarter of fiscal 2025. Meanwhile, Mitsubishi UFJ Financial Group saw its net profit decline 1.8% to ¥546 billion, due to a change in the accounting period at Bank of Ayudhya, a Thai subsidiary. For the full year to March 2026, Mizuho expects its group net profit will total ¥1.02 trillion, up from a previously forecast ¥940 billion and topping the ¥1 trillion threshold for the first time. Concerns about the impact of the high tariff measures of the administration of U.S. President Donald Trump, such as fundraising issues and the postponements of investment, have been limited at client companies, a Mitsubishi UFJ official indicated. The three megabank groups — Mitsubishi UFJ, Sumitomo Mitsui Financial and Mizuho — have estimated that the Trump tariffs could help reduce their fiscal 2025 profits by around ¥80 billion to ¥110 billion. But a Sumitomo Mitsui Financial official said, "The impact could possibly be smaller than forecast."
Japan Times
2 hours ago
- Japan Times
A year after Japan's stock meltdown, markets show resilience and promise
A year after an epic rebound in the yen upended currency trading and sent shares tumbling from Tokyo to New York, Japan's stock market has found firmer footing. It's taken two major routs and a significant unwinding of the carry-trade strategy, used by global investors to borrow heavily in the relatively low-yielding yen to buy other currencies offering higher returns. But twelve months on from Aug. 5, 2024, when Japan's stock benchmarks plummeted 12% and the market lost over $670 billion in value following an unexpected rate hike by the Bank of Japan, the broader Topix index is once again hovering near record highs. And while this summer's share climb bears some technical similarities to last July's ill-fated rise, a combination of clearer BOJ messaging, steady corporate reforms and a better-than-feared U.S. tariff deal has market participants betting against a repeat of the 2024 crash. "It looks like a lot more stable of an environment for the market to go higher,' said analyst Pelham Smithers, who runs an eponymous Japan equity research firm in the U.K. "I think there's room for further rate hikes, which it hasn't felt like before.' The yen is still keeping investors on their toes — the currency gained 2% against the dollar on Friday following disappointing U.S. employment data. The Topix and Nikkei 225 lost over 1% Monday after those statistics stoked recession fears. The yen was trading at around ¥146.75 to the dollar in Tokyo on Tuesday. But the yen's choppiness over the past four weeks is tame compared to its 10% surge over the same period in 2024. And stocks' Monday decline was mild in contrast to their August 2024 collapse, which was also accelerated by weak U.S. jobs data. The relative calm is evidence that investors are finally settling into the new reality of higher Japanese interest rates, said Anna Wu, a cross-asset strategist at investment management firm VanEck in Sydney. "The market has come to a realization that yes, the BOJ will be hiking, but the differentials between the yen and trading pairs, as well as Japan interest rates versus the Fed's rates, are still meaningfully high,' Wu said. That makes another sharp carry-trade unwind unlikely, she added. The newfound acceptance is largely thanks to an improvement in communication by the BOJ, Wu said. Its 15 basis point hike last July caught markets off-guard, sending the yen soaring and global investors rushing to offload carry trade positions. The central bank has since updated its messaging style, ensuring at least one of its board members delivers a scheduled speech and holds a news conference ahead of each policy meeting. For instance, 10 days ahead of its most recent hike in January, BOJ Deputy Gov. Ryozo Himino gave an unusually explicit hint of a raise, with Gov. Kazuo Ueda later backing up the message. The result was telling. Although the quarter percentage point hike to 0.5% was the bank's largest in 18 years, markets were well prepared, and stocks gained in the following week, helped by a rally in banking shares. "The BOJ's decision to raise rates again in January, despite last summer's turmoil, made it clear that the rate hike path will continue,' said Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management. "It's become easier to envision future rate hike scenarios,' he said. Plus, having bounced back from last summer's meltdown and a tariff-fueled rout in April, Japan's equities now look more resilient against potential shocks, analyst Smithers said. "We got out a bit of hot money with the two flash crashes,' he said. "The people in the market right now are the ones who believe in Japan.' A large chunk of those "believers' are foreign investors, drawn to Japan's shares by a record level of corporate share buybacks and hopes that governance reforms will unlock long-term value for shareholders. "Governance reforms and shareholder returns, far from peaking, are scaling new heights,' said Sunny Romo, an investment director of Japanese equities at M&G Investments. That signals room for Japan's stocks to climb higher, especially as global investors look to diversify outside the U.S., she added. Domestic market watchers see potential for more upside, too. Expectations that Japan's ruling parties may give in to opposition calls for consumption tax cuts after a recent election setback are fueling hopes of a boost for retail and other domestic-oriented sectors. "The market is in a different place now than it was a year ago,' said Kazuhiro Sasaki, head of research at Phillip Securities Japan. "Investors have things to look forward to, especially in domestic demand-driven stocks, if the government pursues fiscal expansion.' Optimism is shared by strategists at Goldman Sachs Japan and Bank of America Securities who have hiked their forecasts for the Topix and Nikkei in recent weeks, citing hopes that U.S. tariffs won't derail Japan's economy as much as feared due to a truce limiting levies to 15%. However, the trajectory of Japanese equities still hinges on the yen's stability, and in a world of tariff-driven market swings that's no small caveat. Lingering trade worries and uncertainty around Prime Minister Shigeru Ishiba's fate could still boost safe-haven demand for the yen, stoking volatility, said Klaus Wobbe, CEO of Intalcon Asset Management. "I think the yen could strengthen again to below ¥140, especially if the Fed cuts in the fourth quarter and the BOJ tightens,' said Wobbe. "That would be an indicator that the true unwind is underway. ¥140 is the last line of defense.'
