Happy New Year. As we step into 2025, I extend my heartfelt greetings to you all.

Last year saw a series of political upheavals, particularly in developed nations. The United Kingdom experienced a change in government, Germany and France saw the resignation of their entire cabinets, and in Japan, the ruling Liberal Democratic Party and Komeito coalition lost their majority. In the United States, Donald Trump secured a resounding victory. South Korea, on the other hand, witnessed an impeachment.

Back in 2017, when Trump first took office, I wrote in this column that "the rise of an exclusionary, nation-first ideology is a backlash against excessive globalization—a sign that societal distortions are reaching a breaking point." Eight years later, that sentiment has taken root across the world, deepening further divisions.

The Risks Democracy Faces in the Social Media Era

Those struggling with life’s challenges direct their criticism at the elites and their distrust at the mainstream media. Their discussions take place on social media, where unverified claims of injustice against their targets are created, condemned, and widely shared. Over time, this forms an 'invisible majority.' The rapid expansion of these spaces has outpaced institutional responses, posing a serious risk to democracy.

This crisis can create a breeding ground for authoritarianism. The United States exemplifies this phenomenon. A withdrawal from international cooperation, transactional diplomacy that prioritizes national interests, rejection of diversity, a return to traditional values, anti-immigration policies, and disregard for environmental concerns—Trump-style populism, which challenges established authorities, norms, and values, is accelerating the fragmentation of society.

Science journalist Angela Saini, in her book The Patriarchs: The Origins of Inequality (translated by Miho Michimoto, published by Shueisha), argues that one of the most effective ways to maintain control over people is to divide them into smaller groups, making it harder for them to unite and shifting their loyalty toward those in power. Indeed, this is the very nature of the ‘invisible majority’. Japan is no exception.

Business Opportunities Under the Trump Administration

President Trump's policies may have significant impacts on the economic strategies of various countries and businesses. However, there is no need to overreact to his unpredictable behavior. His extreme and volatile industrial policies create gaps that can, in fact, serve as business opportunities.

The U.S. oil and natural gas industries are expected to regain momentum, driven by Trump's push to "Drill, Baby, Drill." Conversely, investments in climate change initiatives are likely to decline. Blanket tariff increases will be a major blow to companies heavily reliant on exports to the U.S. However, for the U.S., the increase in import costs could drive up domestic prices and weaken the competitiveness of American manufacturers. Shifting supply chains that have relied on imports to domestic production will not be easy in terms of price, quantity, or quality.

Negotiations are likely to take place on a country-by-country and sector-by-sector basis rather than through a blanket approach. In that case, what will be tested are diplomatic skills and international competitiveness in individual items. The Japanese government should engage in strategic negotiations with an eye on the risk of a slowdown in the U.S. economy four years from now.

The Will and Determination to Break Through Change

At the end of last year, Honda and Nissan entered discussions on a potential merger, with Mitsubishi Motors expected to join as well. Nissan, once again, faces massive production cuts and layoffs. This is no longer a lingering effect of Carlos Ghosn's expansion strategy—eight years have passed since his departure. The current management bears responsibility for its failure to compete in the EV market, its lack of hybrid vehicle (HV) options, and its dependence on sales incentives (manufacturer-paid subsidies or benefits provided to dealerships to boost sales). While Honda and Nissan had already begun collaborating in the EV sector, the sudden push toward full-scale integration was reportedly triggered by Foxconn’s acquisition of Nissan shares. The driving force behind this decision was external pressure.

Similarly, in October, Seven & i Holdings announced the establishment of an intermediate holding company to integrate its non-convenience store businesses and began the process of selling its shares. The separation of non-convenience store businesses was a predetermined course. However, the timing of this move suggests it was a defensive measure against the sudden acquisition proposal by a major Canadian competitor announced in August. Here too, external pressure played a decisive role. The response to changes in the external business environment was swift. However, without this pressure, would they have taken this step at this time?

Nissan could have considered forming a capital alliance with Foxconn to strengthen its position in the global EV market. Seven-Eleven could have explored partnerships with the Canadian company as a strategy for overseas expansion. Yet, instead of seeking global synergies, Japan’s government welcomed the Honda-Nissan merger as a domestic consolidation, while Seven & i is considering delisting following an MBO proposal from the founding family. This is no longer an era where “All Japan” (the idea of uniting Japanese companies to compete globally) is welcomed, and delisting from the capital market does not simply protect companies in today’s global economy.

The confrontation between the West, which is struggling with internal divisions, and China, which suppresses even the existence of division, is deepening. The military invasions by Russia and Israel show no signs of resolution. In a world where only national interests are intricately intertwined, stability is becoming increasingly elusive. What is required of us now is resilience and adaptability to change; however, that alone is merely a temporary solution. What is truly needed is the energy to break through these changes and the determination to take an active role in shaping them.

We cannot open the future by distancing ourselves from differences and closing ourselves off to the status quo. We must take risks, engage with the world, and carve out our future.

I sincerely appreciate your guidance and support in the coming year.

 

This Week’s Focus, January 1, 2025

Takashi Mizukoshi, the President