Why Japan’s resurgent nationalism and independence may affect you (sv)
Date: 27 Nov 2025, released on 27 Dec 2025 truncated
Independent Global Geopolitical Macroeconomic Research
Dear reader
For years investors in the West have been able to close an eye on what is happening in the Far East. China’s sabre ratting on Taiwan, North Korea provocations of South Korea and Japan’s debt bubble simply could be ignored. In fact while jobs were shipped to China, investors in the West benefitted from the trillions of USD that Japan injected into the global financial system at costs near zero.
But something in Japan is changing and it could unsettle the fragile global financial and geopolitical landscape. After playing a junior partner role to the USA for many years and caving to back-stage pressures from Beijing and other powers to keep the peace, Tokyo ‘s rearmamenet and long coming shift to the right are converging with an inward looking America.
Resurgent Nippon
After having lived for 70 years under the collective cloud of war guilt, the Japanese began to ask questions about their sovereignty and their place in the world. With the rise of a more homeland-focused Washington, a new generation of political and business leaders are asking questions no one has dared to ask since WW2: “If we are a sovereign country, why can’t we openly disagree with Washington, stand up to China or ask the American military to leave Japan? Some in Germany’s opposition are asking similar questions. But in Japan it is members of the ruling coalition that are raising these questions.
After years of footing defence bills and silently accepting Washington’s lead, the rise of a certain self-confidence in Japan has taken the West by surprise. Others are so self-absorbed with the chaos in Europe or North America, they haven’t even noticed it.
In the West we link national pride to GDP growth. But since the Japanese Stock Market Bubble burst in 1989 Japanese people have questioned the notion of endless GDP growth at any cost .. and embraced demographic shrinking and a stagnating GDP in order to focus on social cohesion and GDP per capita . This is diametrically opposed to Western policy goals and is likely to lead sooner or later to a geopolitical or financial risk event.
There won’t be a shift from one extreme to the other, but the gradual shift away from a highly passive accommodating ally will be felt far and wide.
Tokyo stops immigration experiment With a shrinking labor pool leading to a shrinking economy, Japan was hard pressed by international institutions to follow the G7 and try mass immigration. Always shy about letting in foreigners into Japan, the experiment has being abandoned at the first signs of a sustained rise of foreigners’ induced crime. Japanese are saying some cultures are simply not compatible with theirs.
While all Western nations are obsessesed with maximizing the size of their economies at seemingly whatever cost (massive intake of migrants along the breakdown of social cohesion) as the only way to deal with growing debt mountains, Japan is opting for social cohesion (the safety of its population) despite a growing mount of debt. Tokyo is thus rejecting the worldview and advice of international institutions like the OECD, WEF, IMF, UN, G7 and Worldbank. This is the worldview spearheaded by the USA and European powers over most of the past 45 years. And many think the current deviation by the new US administration is a temporary phenomenon.
Tokyo’s refusal to follow the Western playbook is no small thing. After all, During the US occupation Japan embraced the US political system and the American way of life to a certain extent.
The new Prime Minister is coming under pressure from Western institutions to reverse course, but younger Diet members are asking “c an you have social peace if the young cannot afford a home and the streets are no longer safe?”
Source: Pexels
No American Dream without affordable homes
Japan’s embrace of its ageing population and shrinking labor force has led to some positive side effects – there is an ample supply of homes in Japan. Home affordability is thus high compared with most Western economies.
While home prices have skyrocketed in the West, they have fallen in Japan over the past two decades. Especially in real terms. With the rise of digital work (digital nomads) many young people have moved to Japan from overseas and purchased a home there – and they are loving it. A few months ago I came across a young US family that is living its American dream in Japan – they could afford a single family house. Things work, are affordable and reliable in Japan. This is of course not for everyone and only possible thanks to digital work, but it is a sign of the times.
Social and political stability is no small thing The shrinking of the labor pool and the lack of a massive inflow of migrants has allowed young Japanese to acquire a family home at affordable prices. Japan is thus the only G7 economy where young people are not priced out of the housing market.
This in turn has greatly contributed to the social and political stability of Japan. Japan is probably the only major developed economy where the political polarization is not acute and political discourse is neither hateful nor violent. Most Japanese young women can walk safely at night in Japanese towns and cities.
On the surface and in terms of economic numbers the USA would seem to be doing so much better, but behind Japan’s humble numbers a more content population is at peace with itself .. and gaining in self-confidence. Something it never had since WW2. Japanese only dared to be bold on things Washington approved.
As we have warned for over ten years, Western economies are artificially inflating their GDP and asset prices. US Politicians and investors can brag about the stellar US numbers, but 2/3 of Americans can hardly make ends meet and are living practically paycheck to paycheck. Something doesn’t add up. The facts behind the headline numbers confirm what we have been warning about: America is stil the land of opportunity, but the massive increase in America’s GDP (inflated earnings, inflated house prices ..) masks a somber reality.
The end of the Carry Trade?
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Other subtitles:
Carry Trade
Could Debt be relative?
And there is more
Japan has quietly rearmed
Resurgent nationalism
Events in the Orient will increasingly set the pace of markets, peace, technology and economic development. We thought we had outsmarted Russia, but we might be the ones that took a bait and were outsmarted. A vulnerable West full of bubbles might thus be bracing for a Day of Reckoning. And ironically, a formerly loyal & stoic ally in the Far East is steering a more self-confident course versus China and it could be the one pricking our giant bubbles.
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Geopolitical Research Team – 27 Nov 2025 – Public release on 27 Dec 2025 truncated
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