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Will Japan win or lose under Trump 2.0?

TOKYO – Even before Donald Trump’s return to the White House, Japan is experiencing something of an economic reckoning that government officials seem to be missing.

In at least four of the last five months of the year, Japan’s household spending fell. “At least” is used here because the December figures aren’t yet known. In November, real spending dropped 0.4% year on year. There’s little reason to think things rebounded in the last 30 days of 2025.

The point is that the “virtuous cycle” Prime Minister Shigeru Ishiba’s Liberal Democratic Party (LDP) has promised since 2012 still hasn’t arrived. That’s despite all the champagne cork-popping last Spring when labor unions scored their biggest raise in 33 years.

Ishiba has only been leader since October 1. And with approval ratings in the mid-20s, he might not be around much longer. Perhaps that’s why Ishiba can’t even get a meeting with Trump even as he meets with virtually every world leader imaginable – even Prince William. Just not that of Japan, Trump 1.0’s top ally among democratic nations.

It’s on Ishiba’s watch, though, that Japan’s pre-existing economic conditions are catching up with the place. These include glacial efforts to make the labor force more productive and meritocratic, reduce bureaucracy, rekindle the innovation for which Japan Inc was once famed, empower women and prod more multinational companies to move jobs to Tokyo.

Rather than treat these economic troubles, the LDP continues to fiddle with the symptoms. Look no further than the Bank of Japan’s (BOJ) interest rate policies being trapped around zero for 25 years now. The BOJ still doesn’t have the courage to push rates above the current 0.25%.

Whatever happened to Shinzo Abe’s bold plan 12 years ago

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