The Bank of Japan raised its policy rate to 1% for the first time, bringing a rise in long-term interest rates and the return of market volatility. Corporate restructuring and growth investment are expected to accelerate in 2025–26, while the growing burden on households and concerns about financial institutions are also becoming more apparent.
In June 2026, the Bank of Japan raised its policy rate to 1% for the first time since 1995. In response, the 10-year government bond yield rose to 2.91% in early 2026, and volatility returned to the government bond market after a prolonged slump. The stock market's total market capitalization has doubled since 2024, and some reports indicate that a new generation of investors is becoming increasingly eager to invest.
Against the backdrop of government and Tokyo Stock Exchange guidelines promoting M&A, Japan-related acquisition deals reached a record high of approximately $385.9 billion in 2025. In September 2025, Mitsui Chemicals, Idemitsu Kosan and Sumitomo Chemical agreed to integrate their polyolefin businesses. In July 2026, Mitsubishi Electric announced plans to integrate its power semiconductor business with Toshiba and ROHM. These developments suggest that the industry consolidation that should have taken place in the 1990s is finally getting underway.
On 21 July, the Ministry of Economy, Trade and Industry published growth investment guidance that included an analysis indicating that 65% of the capital of 350 Japanese companies remains tied up in businesses that destroy value. This is encouraging a shift toward growth investment, while the household Engel coefficient reached 30.7% in December 2025, its highest level in 25 years. The failure of 全東信, the impact on regional financial institutions and the increase in bankruptcies in the residential construction industry have also become apparent.
In a Bank of Japan survey on people's livelihood, 62% of respondents said they felt economic conditions had worsened, while trust in the Bank of Japan stood at only 14.1%. Concerns are growing over the coexistence of inflation and rising interest rates, even as capital flows and the acceleration of corporate integration and investment proceed simultaneously.