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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

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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.

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