Japan – Takaichi and corporate reforms

Key takeaways

• Japanese equities are surging, driven by Prime Minister Sanae Takaichi’s pro-growth policies, aggressive fiscal spending, and reforms targeting strategic sectors like AI, semiconductors, and defence.
• Corporate governance reforms are shifting companies from cash hoarding to capital efficiency, with increased focus on shareholder returns, transparency, and operational restructuring.
• Record profits, robust AI demand, and resilient domestic consumption are fuelling strong earnings momentum, positioning Japanese equities for continued growth into 2026.

Introduction

Japanese equities have climbed over 20% this year. This report examines three of the main drivers – Japan's new Prime Minister Sanae Takaichi’s policies, ongoing corporate governance reforms promoting capital efficiency, and record profits across sectors fuelled by global AI demand and strong domestic consumption. We also outline why we anticipate continued strong equity performance into 2026.