Important information

This website is for Institutional Investors in France only.

 

If you are an Individual Investor click here, if you are an Financial Intermediary click here. Should you be looking for information for another location, please click here.

 

By clicking, you acknowledge that you have fully understood and accepted the Legal and Regulatory Information.

Japan Macro brief: Ten talking points on Japan for 2026 and beyond

Akira Horiguchi

25 November 2025

The October election of Japan’s first female prime minister promises to bring greater dynamism to society. All eyes are now on Sanae Takaichi’s focus on more expansionary fiscal and monetary policies.

 

Key priorities for the new administration are expected to include real wage growth, keeping inflation under control, managing expectations on fiscal spending, and curbing further yen weakness.

 

Two recent drivers of Japanese equities, corporate reform and the end of 30-year deflation, remain intact, with greater changes and benefits to come as companies find the environment more conducive for innovation.

 

Japan’s current equity valuation is at the high end of its 15-year trading range, with a 12-month forward price/earnings ratio of 15.6 times, but this remains substantially lower than the S&P 500 at 23x. Arguably, that trading range covered Japan’s deflationary era, so if the new cabinet can successfully implement growth strategies, a further rerating to a higher-teen PE multiple could be possible. 

Topix 12-month forward P/E multiple at top end of 15-year range

Past returns are not a guarantee of future returns
Data as at 13 November 2025. Source: Datastream

Read the full report

Akira Horiguchi is an equity portfolio manager at Capital Group. Akira has 30 years of investment industry experience and has been with Capital Group for 24 years. He holds a bachelor’s degree in economics from Tokyo University. He is also a chartered member of the Security Analysts Association of Japan. Akira is based in Tokyo.

DOWNLOAD PDF

Our latest insights

Top ESG investment themes and more
Ahead of the Curve: Economic convergence and what it could mean for bond investors
Made in America is making a comeback
Beyond mixed signals - A focus on Income
Three investment opportunities in a fragmented world
Rethinking equity allocation from a global perspective
Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
 
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
 
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organisation; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.