Happy New Year. As we begin this new year, I would like to extend my warmest greetings and best wishes for 2026.

 

The first year of "Trump 2.0" has come to a close. His administration has expelled undocumented immigrants, mocked decarbonization efforts, rejected diversity, and threatened the world with reciprocal tariffs. The United States has declared its withdrawal from the Paris Agreement, the World Health Organization (WHO), the United Nations Human Rights Council, and UNICEF, and has dismantled the U.S. Agency for International Development (USAID), which had long been responsible for American foreign aid.

Domestically, the administration deployed military forces to major cities with strong Democratic support under the pretext of "deteriorating public safety," and labeled universities and media critical of the administration as "national security threats."

President Trump’s authoritarian behavior and the centralization of power seem to go beyond the original ideals of “Make America Great Again” (MAGA), which many Americans once supported. It has crossed the line of “America First” and now threatens the very foundation of American democracy, which is at risk of becoming a “fake.”

 

Strengthening Ties with ASEAN Amid U.S.-China Tensions

As global divisions deepen, trust in multilateralism continues to waver. The external environment surrounding businesses is becoming increasingly unstable, and geopolitical constraints on corporate activities are intensifying.

With free trade ideals in retreat, China has, somewhat ironically, taken on the role of defending them on the global stage. At the APEC summit in late October 2025, President Xi Jinping expressed concern over protectionism—clearly aimed at the U.S.—and emphasized the importance of multilateral trade.

In fact, from January to November 2025, China recorded a trade surplus of USD 1.0758 trillion. While exports to the U.S. dropped sharply by 18.9%, China offset this by diversifying exports to ASEAN, the EU, and Africa, with growth rates of +13.7%, +8.1%, and +26.3% respectively. China’s trade surplus is on track to hit a record high for the second consecutive year.

Of course, the loss from declining exports to the U.S.—China’s largest export destination—is significant. However, one could argue that the tariff war initiated by President Trump inadvertently opened new growth opportunities for China. Meanwhile, the U.S. is also working to reduce its dependence on China, and its alternative import sources are largely within Asia.

That said, the relationships between Asia and China, and between Asia and the U.S., are far from win-win. The influx of low-cost Chinese goods poses a threat to developing domestic industries in Asia, while increased exports to the U.S. worsen America’s trade deficit. Between January and July 2025, the U.S. trade deficit with Vietnam, Thailand, Malaysia, and Indonesia expanded by 1.5 times compared to the previous period.

Trade deficits are something President Trump strongly opposes, and there is growing concern about sudden punitive measures such as additional tariffs.

For Japanese companies, the U.S. and China remain the two greatest sources of geopolitical risk. U.S. foreign policy remains unstable, and relations with China have deteriorated. However, the COVID-19 pandemic has strengthened the crisis response capabilities of major corporations, and many are now restructuring their business portfolios. While this will take time, it is a challenge that can be overcome. We hope to identify new business opportunities within Asia’s structural issues, based on neutral and stable partnerships.

 

Toward Shared Growth: Rethinking Traditional Business Structures

At the end of last year, the Bank of Japan raised its policy interest rate to 0.75% to promote price stability and sustained wage increases. However, this is still a relatively accommodative level compared to real interest rates, and achieving a growth-oriented economy requires continuous wage hikes. With strong encouragement from the government, momentum for wage increases is growing in the industrial sector.

Nevertheless, the labor share of income remains low. At the end of 2024, corporate internal reserves reached a record high of JPY 636 trillion, while the labor share stood at just 53.9%—the lowest since 1973. This suggests that, from a macroeconomic perspective, there is ample potential for wage increases. The real challenge lies with small and medium-sized enterprises (SMEs), which lack the financial capacity to raise wages.

According to the Japan Chamber of Commerce and Industry, over 70% of SMEs plan to raise wages, but 60% of them are doing so defensively—despite no improvement in business performance (survey period: April–May 2024). Many SMEs operate within a hierarchical subcontracting structure dominated by large corporations, and are excluded from fair profit distribution. In fact, the number of official warnings issued under Japan’s Subcontract Act still exceeds 8,000 cases annually (FY2024), indicating that the transactional structure between dominant large firms and subcontractors remains fundamentally unchanged.

Many listed companies are forecasting strong earnings for the fiscal year ending March 2026. To help Japan’s economy move beyond the aftereffects of ultra-loose monetary policy, large corporations must take the lead in raising profitability across the entire supply chain.

Three years have passed since OpenAI released ChatGPT, and the world has changed dramatically. While we now face a host of issues—deepfakes, intellectual property rights, security, and governance—there is no turning back. It feels as though the future has suddenly been pulled into the present, yet our confidence in the future seems to be fading.

Today, vague anxiety and high expectations for innovation coexist. When this anxiety is compounded by real-world inequality and a sense of stagnation, Japan too may become vulnerable to Trump-style populism.

So how should we act to restore trust in the future? We must reject falsehoods, maintain a diverse discourse based on facts, and rebuild trust in multilateralism. This is the foundation—and the prerequisite—for preserving our freedom and prosperity.

 

We look forward to working together and sharing continued progress in the year ahead.

 

Takashi Mizukoshi, the President
This Week’s Focus, January 1, 2026