We apologize for the sound issues we encountered during the briefing. We are looking into backup options and doing our best to get these issues out of the way in future sessions.
Good morning, good evening, or wherever you may be tuning in from. Today I am speaking to you from Hilo, on the Big Island of Hawai‘i. As many of you know, this weekend is a deeply personal one for me. My daughter’s wedding is taking place here, and in just a few hours I will be walking her down the aisle. But as always, no matter where I am in the world, I wanted to take this moment to honor our tradition and bring you the latest in Japanese politics. This marks our 237th consecutive weekly episode. It’s nearly 4.7 years without interruption — and I’m humbled to share this community of JapanHands with you.
Key Themes
Currency & Markets
The yen closed at ¥146.87 to the dollar, extending a summer of volatility. Meanwhile, U.S. inflation data and dovish Fed signals put pressure on Tokyo markets, while U.S. Treasury Secretary Bessent’s criticism that Japan is “behind the curve” on inflation stirred political debate. With BOJ’s next policy meeting (Sept. 19–20) looming, speculation grows over whether ultra-loose monetary policy can be sustained. The ¥150 mark is again in view, with bond yields, energy import costs, and export performance as decisive factors.
Diplomacy
Prime Minister Ishiba’s diplomatic calendar is full. At TICAD 9 in Yokohama, Japan hosted delegations from 49 African nations, announcing 300+ cooperation agreements on infrastructure, climate, and investment. Upcoming state visits include South Korea’s President Lee Jae Myung (Aug. 23–24) and India’s PM Narendra Modi (Aug. 29–31), with Modi expected to highlight Osaka Expo ties. Meanwhile, Defense Minister Nakatani’s trip to Turkey advanced talks on drones and missile tech. This ties into Japan’s wider push for NATO collaboration and diversification of its defense industry beyond U.S. reliance.
Domestic Politics
The Aizawa Commission is assessing discontent within the LDP after disappointing Upper House election results. Some members are pushing for a leadership contes. Secrecy over individual voting records and Ishiba’s expected September cabinet reshuffle, however, make a revolt unlikely. The Morikawa Report blames poor campaign strategy rather than leadership failures, buying Ishiba time. In coalition politics, Ishin no Kai demands recognition of Osaka as Japan’s “secondary capital.” At the same time, the DPP signals willingness to cooperate if the ruling coalition makes policy concessions.
Economy
Machinery orders rose 3% in June, showing some resilience. Tariffs, especially U.S. duties on autos and metals, however continue to bite. Rising energy costs and climate extremes add strain. Fisheries report mass fish die-offs due to overheated coastal waters, while farmers struggle with heat-stressed crops. Tourism is rebounding strongly, but Expo Osaka attendance lags expectations, with infrastructure reliability questioned after a major train line breakdown stranded 30,000 people.
Defense & Regional Security
Japan’s MoD is preparing a record ¥8.8 trillion defense budget for FY2026. The focus is on drones, coastal defense, and missile counterstrike capacity, aiming to reach 2% of GDP by 2027. In the region, North Korea escalates rhetoric by drafting a constitutional amendment labeling South Korea the “primary hostile state.” Meanwhile Kim Jong-un lauds DPRK fighters returning from Russia. Joint China–Russia naval maneuvers in the East China Sea keep tensions high, monitored closely by U.S.–Japan patrols. Concurrently, Japan deepens security ties with India, Turkey, and Southeast Asia to expand its defense industrial reach.
In closing
As August ends, Japan balances celebration and turbulence. Prime Minister Ishiba is likely to stay in power, with the opposition too fragmented to challenge him. The economy faces a difficult mix of tariff pressures, climate shocks, and demographic realities. Looking to September, attention shifts to a possible Diet session. Many expect to see Ishiba’s new cabinet lineup and high-stakes summits that will define Japan’s trajectory into 2026.
Are you familiar with “Tokyo on Fire”? Episodes are available on YouTube “Langley Esquire”: excruciatingly-gained insights sifted over 40 years in-country! Entertainingly presented.
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If you gain insight from these briefings, consider a tailored one for your Executive Team or for passing-through-Tokyo heavyweights.
To learn more about advocacy in Japan, read our article “Understanding the Dynamics of Lobbying in Japan.”
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