Japan’s Policy Shift: Growth Outlook and Asset Class Impact

Japan’s economy faced mixed dynamics in H1 25 as inflation stayed above target and tariff risks weighed on growth. While real GDP remained flat, wage gains and resilient consumption underpinned the outlook. Equities traded at a valuation discount to global peers, supported by corporate reforms and robust cash flows. Banks outperformed broader markets on rising NIMs, while bond yields climbed as the BoJ scaled back purchases. The Yen stabilized following policy tightening, boosting investor confidence. Looking ahead, gradual rate hikes, capex revival, and domestic demand are set to anchor Japan’s recovery despite persistent global uncertainties.