Issue 32: Kamikaze Dodged?

26 June 2025

The disastrous showing of the LDP party in the Tokyo local elections, was its own political Kamikaze. Voter frustration is mounting over the high cost of living. Real wages are contracting and retail sales volumes weakening. Despite these headwinds Trading Post is overweight Japanese equities and a buyer of the yen. Business cycle indicators are positive, and M&A activity is booming. Japanese manufacturers remain highly diversified – foreign sales account for 40% of total sales and 37% of production is abroad. They are hedging their bets by expanding in the US and India while scaling back in China. These factors contribute to the resilience of corporate earnings growth. The Bank of Japan has changed tack and Trading Post is following suit, now  forecasting that the policy interest rate will stay on hold for the rest of 2025..