Japan's 'Normal' Shift: Economy Transitions Amid Rising Debt and Security Concerns

Japan is experiencing a significant shift from its post-war era, marked by price stability and low interest rates. The country's economy has become more 'normal,' with inflation rising above 5 percent annually since 2024. The Bank of Japan has begun lifting interest rates, and defense spending has increased to over 2 percent of GDP.

The government is also reinterpreting Article 9 of the Constitution to acquire counterstrike capabilities. Prime Minister Sanae Takaichi's LDP-Ishin coalition is pursuing policies that were previously unthinkable in Japan, including constitutional revision and firmer security and immigration lines.

However, this normalization brings its own set of challenges. The government debt exceeds 200 percent of GDP, making it difficult to manage with rising interest rates. Immigration is becoming a politicized issue, and the country's security policy raises questions about democratic legitimacy and constraint.