Nearly 80% of major Japanese firms anticipate continued economic growth in 2025, driven by wage increases and recovering consumer spending, according to a Kyodo News survey of 114 companies conducted from late November to mid-December. This optimism reflects a steady increase from last year, when 73% predicted moderate expansion.
Key drivers of confidence include a recovery in individual consumption (cited by 88% of respondents) and rising wages (81%). Japan’s average monthly wage rose by 1.8% year-on-year in 2023, the highest increase in over two decades, helping offset inflation’s impact. However, challenges persist, with 16% of firms expecting the economy to remain flat and 2% predicting a slight contraction, primarily due to rising costs. Inflation reached 3.6% in 2023, the highest in over 40 years, underlining concerns about price stability.
To address labor shortages, 46% of companies are planning or considering wage hikes in 2025. Japan’s labor force participation rate for women has risen to 72.7% as of 2023, but overall demographic challenges continue to pressure businesses.
Global factors also weigh on corporate strategies. When asked about the potential impact of a second U.S. presidential term for Donald Trump, 13% of firms cited concerns, including tariffs (65%) and economic security policies toward China (46%). Japan exported $140 billion worth of goods to the U.S. in 2023, underscoring the importance of stable trade relations. Energy and environmental policies were cited by 50% as potential risks, particularly as global energy costs remain volatile.
Despite uncertainties, Japan’s economy remains on a growth trajectory. With an unemployment rate of just 2.6% and consumer spending accounting for 55% of GDP, the focus for 2025 will be balancing wage growth with inflation and adapting to international challenges. As Japanese firms plan for the future, they aim to leverage domestic strengths while navigating a complex global landscape.
