Japan

What does the map enable, and what does it threaten?

Japan is an island chain: the sea gives it natural defences and long coasts for trade, but the land gives it almost no energy or minerals. Its energy self-sufficiency was just 16.4% in fiscal 2024²², so its prosperity rides on sea lanes it does not control. Its neighbourhood is the hardest of any rich democracy, with China, North Korea and Russia all close by. China has shown it will use that proximity: Tokyo lists radar illumination of Japanese aircraft and curbs on imports of dual-use goods from Japan among its coercive actions¹², and trade restrictions reportedly cut supplies of rare earths to Japanese firms¹⁸. Defensible islands, poor in resources, in a dangerous neighbourhood.

Is the population growing, skilled and staying?

Japan's people are among the best educated anywhere. In PISA 2022 its fifteen-year-olds ranked third in reading, an all-time high, second in science and fifth in mathematics⁹. But there are fewer of them each year. Births to Japanese citizens fell to 671,236 in 2025, the lowest since records began in 1899, and the fertility rate fell to 1.14; the decline is running about 15 years ahead of official projections¹¹. The median age is about 50, and the UN projects the population at 122.4 million in 2026^1,2, shrinking by more than 900,000 a year¹⁷. Unemployment of 2.5%⁴ reflects scarcity of workers, not strength. Superb quality, collapsing quantity.

What habits does the society reward?

The habits LKY most admired are deeply rooted in Japan: discipline, thrift, diligence, respect for learning and for rules. The results show. Its students placed in the top five in all three PISA subjects in 2022, with reading at an all-time high⁹. Public life is fairly clean: Japan scored 71 on Transparency International's 2025 index, unchanged from the year before, and ranked 18th of 182⁸. The weak side of a strong, settled culture is slow adaptation, and family life is where it shows: births and fertility keep hitting record lows¹¹. Comparable data on trust and work norms over time is patchy, hence medium confidence. This score is about institutions and social habits, not about any group.

Who rules, how are they chosen, and are they competent?

Sanae Takaichi has a mandate few Japanese leaders have had. Her Liberal Democrats won 316 of 465 lower-house seats in February 2026, more than two-thirds, beating the postwar single-party record¹⁰. On security she has used it: a record defence budget above ¥9 trillion and a pledge to reach 2% of GDP two years early¹⁴, with the three core security documents being rewritten for the end of 2026¹³. On the demographic crisis, deeds lag: births keep hitting record lows, falling faster than official projections¹¹. Her approval has slipped to 49.1%, the lowest since she took office, a fall Kyodo linked partly to her slow response to a farm minister's resignation over remarks about cutting road funds to municipalities that did not back him¹⁶. Decisive on defence, not yet on demography.

Is there rule of law, low corruption and predictability?

Japan is a well-ordered state. Laws are obeyed and enforced, the courts work, and power changes hands by election: February's vote turned a government that lacked a lower-house majority into one with more than two-thirds of the seats¹⁰. Public integrity is good but not the best: Japan scored 71 on Transparency International's 2025 index, unchanged, and ranked 18th of 182 countries⁸. Ministers who misstep are held to account; the farm minister stepped down in October 2026 after criticism of his remarks on road funding¹⁶. A single corruption index carries much of this judgement, hence medium confidence. Strong, a notch below the very cleanest states.

Where are the fault lines, and how stable are they?

Japanese society is unusually cohesive, and its politics turn on consensus more than division. In February 2026 voters gave a single mainstream party more than two-thirds of the lower house¹⁰. The new strain is immigration. Foreign residents reached a record 4.28 million at the end of June 2026, about 3.5% of the population, and the government has tightened permanent-residency rules, requiring higher incomes and better Japanese¹⁷. With the population shrinking by more than 900,000 a year, one immigration expert says the country has no choice but to rely on foreign workers¹⁷, while the government sets stricter terms for those who stay. How Japan admits the workers it needs while keeping social trust is now a live question. Strong fabric, facing a new test.

Why does the world need this country?

The world still needs Japan. The IMF puts its 2026 GDP at about US$4.3 trillion³, and exports reached ¥110.4 trillion in 2025, the highest since comparable records began in 1979⁷. China is its largest trading partner²¹, while the United States bought ¥20.4 trillion of its goods in 2025⁷. It is also a major source of capital: under its 2025 trade deal with Washington it set up a US$550 billion investment fund, in return for a 15% US tariff on its goods¹⁵. What holds the score down is slow growth, 0.1% in 2024 and 1.2% in 2025³, and a GDP per head of about US$35,400³.

What does it need, want and fear?

Need: secure sea lanes for imported energy, since domestic sources cover only 16.4% of supply²²; open access to its two biggest markets, China and the United States^7,21; and a US alliance that holds. Want: a constructive and stable relationship with China on its own terms, which Takaichi said Japan would pursue while it will firmly assert its positions¹⁸; defences strong enough to deter coercion, now being set out in revised security documents¹³; and enough workers for a shrinking labour force¹⁷. Fear: a conflict over Taiwan that draws Japan in; Chinese economic pressure such as curbs on dual-use goods¹²; US tariff demands¹⁵; and demographic decline that outruns policy¹¹.

Who are its patrons, rivals and hedges?

Japan's security rests on the US alliance and its economy is bound up with China, its largest trading partner²¹. That balance broke in November 2025, when Takaichi suggested Tokyo could intervene in the event of an attack on Taiwan, which Beijing claims as its territory. China warned its citizens against travel to Japan and imposed trade restrictions¹⁸. Tokyo says China has escalated coercive actions, and its 2026 Diplomatic Bluebook downgraded China from one of its most important relationships to an important neighbouring country¹². Washington, meanwhile, has extracted a price: a 15% tariff and a US$550 billion investment fund¹⁵. Japan is answering by rearming¹⁴. Squeezed from both sides, with its room for manoeuvre narrowing.

Can it deter, or does it depend on others?

Japan is building real military power from a low base. SIPRI puts military spending at 1.41% of GDP in 2025, up from 0.97% in 2022⁵. The government counts wider defence-related spending and pledged to reach 2% of GDP by March 2026, two years early. Its fiscal 2026 budget, above ¥9 trillion, is a record, aimed at strike-back capability and coastal defence with cruise missiles and unmanned systems, and its five-year programme would make Japan the world's third-largest spender¹⁴. The three core security documents are being revised for the end of 2026¹³. Japan has no nuclear weapons and relies on American deterrence. Readiness data is limited, hence medium confidence.

Rising, stagnant or declining, and how fast?

Judged by results, Japan is moving slowly, not falling. The IMF records growth of 0.1% in 2024 and 1.2% in 2025, and forecasts 0.7% in 2026³. Output grew at an annualized 1.4% in April-June 2026²⁰. Inflation has returned, and in September the Bank of Japan raised its policy rate to 1.25%, the highest in 31 years and another step away from decades of exceptionally low rates¹⁹. The IMF puts gross government debt at about 199% of GDP in 2026, high but edging down as a share of output³. Against that, the workforce shrinks every year^11,17. Stable at a low rate of growth, with demography pulling down.