Kristy Hsu, director of the Taiwan ASEAN Studies Center at the Chung-Hua Institution for Economic Research, stated in a February 9 symposium on “Japan’s Recent General Election Results and Their Implications” that Japanese Prime Minister Sanae Takaichi’s planned March visit to Washington will be closely watched on several fronts. Chief among them is how Tokyo intends to deliver on the US$550 billion investment commitment proposed during former Prime Minister Shigeru Ishiba’s tenure, alongside the new government’s defense and economic policy trajectory. The visit carries broader significance for U.S.-China-Japan trilateral dynamics. With a potential Xi-Trump summit expected in April, Tokyo’s moves will inevitably signal where Japan intends to position itself amid intensifying U.S.-China strategic competition.
Monetary Shift and Fiscal Pressure Converge
Hsu analyzes that Japan’s economy stands at an inflection point. The Bank of Japan ended its negative interest rate policy in March 2024 and has since raised rates four times, bringing the benchmark rate to approximately 0.75%, with further hikes remaining possible. Rising interest rates and government bond yields have amplified market volatility and raised concerns about fiscal discipline. While the Nikkei has reached record highs, Japan’s central challenge has shifted from deflation to the structural problems of inflationary pressure and insufficient long-term growth momentum. Containing inflation while sustaining growth has become the new government’s foremost policy priority.
Trade and Investment Strategy Pivots Toward Risk Diversification
Hsu highlights that Japan’s economic growth has been relatively subdued in recent years. The IMF projects an expansion of about 1.2% for this year, although official forecasts have been updated to reflect more optimistic expectations. On the external economic front, Japan is not simply pivoting away from China toward the United States. Rather, it is recalibrating its structure and diversifying risk. Over the past three years, Japanese investment in China has declined by more than US$3 billion annually, while investment in Southeast Asia stands at approximately US$25 billion, and investment in the United States has reached US$66 billion, making America Japan’s largest export market. Nevertheless, China remains Japan’s largest source of imports, and supply chain dependencies cannot be fully unwound in the near term.
Author: CIER Editorial Team
Date: February 11, 2026