The 15th Japan Securities Summit 2026 in London

Japan is shifting from a deflationary, cost-cutting economy to a dynamic growth-oriented one. Finance is essential to sustaining this positive momentum. The government is promoting Japan as a leading asset management center. For Japanese households, the number of NISA accounts has increased across all age groups. For companies, corporate governance reform has made significant progress. In summer 2026, the government will develop a comprehensive financial services strategy, while a plan was formulated last year to ensure Japan’s regional financial institutions play a greater role in supporting local economies. Innovative digital payment services are another important issue to consider. We are working to enhance the value of Japanese companies through finance, foster an economy trusted by global investors and create a virtuous cycle in which capital flows into Japan.

This panel examined three things: the current situation of the Japanese economy, risks and, finally, opportunities.

For Kumagai, the Japanese economy is at a historical turning point. Structural changes are accelerating as the economy emerges from deflation, wage hikes gather momentum and capital investment increases. Supporting factors include improvements in the household income environment, government economic policy and continuing accommodative monetary policy. Kumagai sees Japanese stocks as undervalued relative to corporate profits.

Although mindful of the highly cyclical nature of the Japanese economy, Webber described Japan as an “incredibly vibrant and exciting market” with key technologies and some very good companies, providing a way to diversify away from U.S. equities. Particularly positive developments were the material increase in the number of companies buying back shares and the decline in companies trading at below book value.

What about downside risks? Kumagai reeled off five: The Trump tariffs; the deteriorating Japan-China relationship; escalating tensions in the Middle East and Ukraine; a sharp drop in the yen exchange rate; and rising domestic interest rates. For now, Prime Minister Takaichi is maintaining fiscal discipline, but that could change. “In the future, the administration’s expansionary fiscal policy might carry the risk of a yen depreciation cycle and a rise in long-term interest rates,” Kumagai commented.

Webber was worried about Japanese companies’ possible complacency in the face of the competitive threat from China, “an emerging giant and incredibly strategic in its investment, whether electric vehicles, the battery supply chain, or healthcare and pharmaceuticals.” On the market side, vulnerabilities he highlighted were the steepening of the yield curve, volatility in JGBs and the risk of rapid yen strengthening.

As the author of the influential book The 100-Year Life, Gratton’s focus was on demography. As Japan’s population ages and shrinks, the traditional three-stage life of full-time education, full-time work and full-time retirement is breaking down and needs to be replaced by the multi-stage life, with lifelong education, greater flexibility at work and a later retirement age. While Japan is doing exceptionally well on the healthy aging front, some Japanese organizations are proving too hierarchical and bureaucratic to embrace more flexible and amenable working conditions. Immigration, meanwhile, is needed to fill the skills gap. Is there any viable solution to population decline itself? Gratton pointed out that while some governments have managed to restrict the number of children women can have, none have ever succeeded in getting them to have more.

What, finally, about opportunities? If Japan can increase three key factors — labor input, capital stock and total factor productivity (TFP) — Kumagai believes that it could achieve a high-growth scenario, with annual economic growth of 1.5% through to 2040. For his part, Webber saw an opportunity in Japan’s best businesses ditching the bad habit of hoarding cash and achieving better capital efficiency. He also noted that the conventional view that a weak currency is good for Japanese stocks is out of date and that the combination of a strong stock market with a strong yen would be a major plus for foreign investors. The positives that Gratton singled out included soft power and social cohesion. “When you see what the lack of social cohesion does to a society, does to its economy, you realize this is a very important intangible asset,” she said.

Three factors — inflation, a decrease of equity outstanding and greater focus on profits — make a bullish case for Japan’s EPS outlook. “The Nikkei has already achieved our ¥56,000 target for this year-end and is closing in on our next year-end target,” Kitaoka said. Sisson was equally positive on Japan’s policy environment, describing it as “one of the most unified ‘Let’s do good governance as a driver for growth’ frameworks anywhere,” and praising the “phenomenal” progress of the last 10 years. She did, however, recommend a degree of scepticism. International investors may have been thrilled with the announcement about Japanese companies needing to publish their securities report before their AGM — but that is just standard procedure everywhere else. Progress on independent directors is undoubtedly being made — but a ratio of one-third is not that impressive compared to other major developed markets. There is a bifurcation between big global companies which embrace best practices and the many listed companies still somewhat reluctant to change.

Japanese non-financial corporations still have about ¥100 trillion, or over 10% of total assets, in cash and deposits. This practice speaks of a lingering deflationary mindset and is “destroying corporate value in real time,” according to Kitaoka, who pointed out that the equivalent percentages in Europe and the United States are around 8% and 6%, respectively. Holding such levels of cash is neither internationally competitive nor compatible with maximizing long-term sustainable value for companies and shareholders, noted Sisson, adding that too many Japanese companies were prone to reflexively resist engagement with investors.

Activist or engagement funds own over 1.1% of Japan equities. Recently, they have broadened their targets from cash-rich companies to property-rich companies and listed affiliates. Given that the equivalent ratio in the United Kingdom is above 2%, Kitaoka expects the upside momentum of this activist presence to continue.

The panelists concluded by stressing the bullish outlook, that this room for improvement suggests great opportunity for investors, with Sisson pointing to the “enormous hope” she gets from the Japanese policy environment, while Kitaoka highlighted the timely combination of the inflationary shift, labor shortage and the TSE and FSA’s corporate engagement.

Japan conducted its first overseas offering of Japanese government bonds in the City of London in 1870. Today, Japan is one of the world’s largest sovereign debt markets, with outstanding government bonds exceeding ¥1,110 trillion. The Japan Securities Clearing Corporation (JSCC) clears about 80% of the OTC JGB cash bond market and daily average clearing volume — around ¥230 trillion per day — has been increasing significantly in recent years as market activity has picked up.

Since 2024, when the Bank of Japan ended negative interest rates and yield curve control, yields have continued to climb, particularly with super-long bonds. A decline in demand from the life insurers and volatility after the U.S. tariff announcement led the Ministry of Finance to reduce 30- and 40-year bond issuance. To compensate for this decreased demand from the life insurers, as well as the Bank of Japan reducing its JGB holdings as monetary policy normalizes, the Ministry of Finance is increasing the issuance of short- and medium-term bonds and looking to secure a more diversified customer base. This includes overseas investors, individuals, non-profits and apartment associations. New products, from floating-rate JGBs likely to appeal to banks to JGB ETFs targeted at yield-hungry domestic investors, are also being explored.

There are concerns that the fiscal policy of the Takaichi Cabinet could be expansionary, and Yoshida asked whether there is “a sense of unease in the bond market,” despite the optimism the government is seeking to project. As the Ministry of Finance sees it, however, the Takaichi government has a fiscal policy that is both “responsible and proactive”, focused on supporting households and corporations grappling with price rises in the short term, and investment in strategically important areas in the medium and long term. In future, the government intends to be more flexible in its issuance and will introduce a semi-annual review of issuance as it seeks to be more open with investors. Shirota was keen to stress that proactive financing does not mean dissolute financing. The final message from the Ministry of Finance? “We are committed to fiscal discipline and to making the JGB market more attractive, more liquid and more trustworthy.”