2025 has been a challenging year for the Japanese economy on several fronts. At the start of the year prospects for Japan were relatively positive, but global economic challenges have undermined some of that optimism. Inflation has been higher than hoped, growth slower than anticipated, and real wages and exports both declined. On the positive side, inbound tourist numbers were up, the stock market reached record highs, and domestic consumption held up well.

Prospects for the remainder of 2025 and into 2026 are mixed. The impact of US tariffs is expected to continue to weigh on Japan’s economy. Inflation is expected to ease and there is hope that real wages will increase.

Overall, exports from New Zealand to Japan grew strongly in the first half of 2025, up 5.3% on an annual basis for the year ending June 2025. Dairy, horticulture, and food and beverages exports grew while aluminium, meat and forestry exports declined. Imports from Japan saw a significant decline, mainly in automobiles and oil (diesel). This helped push New Zealand into a trade surplus with Japan for the first time since 2021. Services trade continues to recover but remains below pre-pandemic levels due to the slow recovery of overall outbound tourism from Japan.

With the Takaichi administration term only recently having assumed office it is too early to assess the economic impact of the new administration. The Nikkei Stock Market reacted positively to Prime Minister Takaichi’s inauguration, reaching record highs.

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