The Trump Shock raises Japan’s reputation with heightened expectations for the country’s political, economic, and social stability

1. The Trump Shock

Donald Trump’s reelection in the United States has upended many of the hitherto taken-for-granted foundations for shaping global order.

In US domestic politics, destruction of democracy is ongoing. Many experts draw an analogy between Trump’s politics and Hitler’s politics in the early 1930s.

For fear of the overwhelming clout wielded by President Trump, Congress, the courts, and the media in the US are too flustered to criticize his administration.

I hear that the US business community is too upset by his abnormal policies and behaviors to grasp or respond to them.

Most experts hope that inflation and declining stock prices will take such a toll on the US economy that Trump will adjust his policies.

European countries are becoming autonomous from the US and more united to substantially build up their self-reliance defense capabilities, with the United Kingdom, France, and Germany playing a central role.

The UK has rejoined Europe, rapidly creating a chasm between European countries and the US. Until last summer, the UK, France, and Germany had all been suffering from domestic political instability.

However, the leaders of the three countries – British Prime Minister Keir Starmer; French President Emmanuel Macron; and incoming German Chancellor Friedrich Merz, leader of the Christian Democratic Union (CDU/CSU) – have now expressed their opposition to the Trump administration, thus gradually regaining their grip on political power.

The US was the only country among the G7 to oppose the February 14 UN resolution that called for the immediate withdrawal of Russian troops and the territorial integrity of Ukraine, highlighting a schism among the G7 nations.

“Just until six months ago, no one could have imagined a world like this.”

This represents what I often heard during my trip to the US and Europe from late February to the middle of March.

2. Socioeconomic instability in affected countries

Countries affected by the “Trump Shock” are still suffering from socioeconomic instability.

Analysists say that higher tariffs, tighter immigration controls, and fewer civil servants under the Trump administration may run the risk of fueling inflation and driving down stock prices, the dollar’s value, and consumption in the US.

If approval ratings for President Trump fall, the governing Republican Party might lose a majority in the House of Representatives, where Republicans have a narrow majority, in the midterm elections slated for the fall of 2026.

A defeat in the lower house would significantly limit the leeway for the Trump administration in its policy making and delivery.

Some experts in the US and Europe are concerned that in an attempt to avoid such a state of affairs, President Trump might issue a state of national emergency to cancel the midterm elections.

European countries are united in terms of security, but their economies remain unstable owing to rising prices of energy and grains.

They have no choice but to change fiscal rules aimed at maintaining fiscal discipline so that they can increase fiscal deficits to substantially boost defense spending.

Faced with the Trump Shock, major countries are closely united at the moment. If the shock lingers, however, it is feared that the result will be fewer budget allocation options, a smaller budget for socioeconomic stability, and greater discontent among the public.

Financial implications for interest and exchange rates are also a source of concern.

China is still seeing its economy stagnate. Since last September, Beijing has been implementing economic stimulus measures of various kinds. But the country faces serious problems of a faltering real estate market and deteriorating regional finances.

Despite some indications of improvement in real estate sales prices, the real estate markets in major cities are forecast to recover their stability by 2026 at the earliest and by around 2028 at the latest.

What is more, the Chinese economy cannot avoid the growing negative impact of structural factors going forward, such as fewer working-age population, slower urbanization, and less construction of large-scale infrastructure.

More time may be needed until corporate executives and general consumers in China regain confidence to the extent that investment and consumption are stabilized.

3. Japan is the most stable among developed countries

It was against such a global backdrop that I visited the US and Europe on business from late February to the middle of March. During the three-week trip, many of my friends there who are experts in diplomacy, security, or economy told me that Japan was now the most stable among developed countries.

When I heard such a comment for the first time when I arrived at Washington, D.C. from Japan three weeks ago, I could not believe my ears.

However, as I better understood the political and economic realities in major countries in North America and Europe, I was beginning to think that what my friends were saying was correct in some respects.

First, Japan is enjoying relatively stable government.

The Diet is not divided or dysfunctional. The ruling and opposition parties are having constructive discussions. Budget deliberations are going steadily.

In the US, the ruling and opposition camps are at ideological loggerheads, making it extremely difficult to adjust bills through compromise based on discussions.

In France, the budget bill submitted by the ruling bloc was voted down. This led to the resignation en masse of the Cabinet led by Prime Minister Michel Barnier in early December of 2024, only two and a half months after he assumed office.

Then François Bayrou was appointed prime minister. He formed a new cabinet, which managed to pass the budget bill through Parliament. However, he will likely continue to have difficulty in navigating Parliament.

In Germany, German Chancellor Olaf Scholz lost a vote of confidence, forcing him to call a snap election on February 23. Friedrich Merz, leader of CDU/CSU – which is the largest party in Parliament – is in talks with the Social Democratic Party, the third largest, for a coalition cabinet.

In the neighboring country of South Korea, the posts of both President and Prime Minister remain vacant after the impeachment bills passed. Confusion in government lingers.

Second, Japan has not seen the rise of a far-right party.

The US and major European countries, on the other hand, are seeing the rise of anti-immigrant, ultra-right forces amid growing public discontent with immigrants.

In the US, no sooner had President Trump taken power than he reversed the course taken by the Biden administration, overturning liberal policies, which tolerated illegal immigrants, valued green (environmental protection) initiatives, and embraced DEI (diversity, equity, and inclusion).

He also supports ultra-right forces abroad, including the National Rally, led by Marine Le Pen, in France; and Alternative for Germany (AfD), co-led by Alice Weidel, in Germany.

Elon Musk, a strong supporter of President Trump, held a live chat on X with Alice Weidel and called for the German public to support AfD.

Such support from the Trump administration is welcomed by the leaders of ultra-right forces, although it is not seen as a factor behind the rising popularity of these forces among the French and German public.

Japan is not in a situation that facilitates the rise of the far-right. For one thing, immigrants are not a serious issue. For another, the government is moderately promoting green policy and DEI while respecting the will of the public.

Third, the Japanese economy is slowly recovering stability.

Since 1990, Japan has been plagued by a number of issues during what is known as “the lost three decades.” These issues include zero growth, the survival of zombie companies thanks to zero interest rates, declining innovative spirit, and dwindling income. They came after the economic bubble burst, the financial crises, and the subsequent deterioration of corporate performance.

It now seems, however, that the Japanese economy is beginning to get out of the protracted doldrums, backed by recent increases in prices and wages.

Still, it lacks strength due to the downward trend of real wages as consumer price increases outpace wage increases.

However, if wages continue to grow this year and at a pace faster than price increases, the Japanese economy will gradually regain its strength.

Japanese businesses are welcomed in the US, Europe, and China.

My hope is that Japanese firms will take advantage of this opportunity to expand their business overseas more aggressively so that they will regain the glory they had enjoyed until the 1980s.

4. Shared morality is the basis of Japan’s stability

Political analysts say that the morality deficit is now a common challenge for the leaders of major countries.

The leader of any country, be it a democracy or autocracy, needs morality.

The leaders of major countries tend to opt for policies that play up to the electorate in order to secure their power base.

Some of them are destroying democracy, oppressing the public, or taking the lives of citizens in another country. It is hard to find a leader who demonstrates high morality.

Fortunately, the leader of Japan does not allow the destruction of democracy or the rise of ultra-right forces. He is against any war of aggression on any country.

Despite some criticism, Prime Minister Shigeru Ishiba is more sincere in his policy making and delivery to meet the needs of the public than his counterparts in Western and East Asian countries.

It may be difficult to recognize what characterizes the way government is run in Japan in contrast to other major countries solely by looking at the situation in Japan rather than visiting Western and East Asian countries and experiencing the serious domestic situations there.

I regularly visit the US and major countries in Europe and East Asia to exchange views with experts. When I compare the situations the peoples of these countries find themselves in with the situation in Japan, I feel that the Japanese people are living in a relatively favorable environment.

I believe the fundamental factor for this state of affairs is that political and economic leaders in Japan maintain a relatively high level of morality.

This, in turn, is supported by the shared morality among the public as a whole.

It is also a fact, however, that Japan’s character-building education aimed at nurturing moral leaders is deteriorating, as I described in my contribution in February titled “Increase public spending on education to improve character-building education, not just to make tuition free.”

If Japan is to build on its strengths based on objective comparisons with other major countries in the world, it should aim to focus on enhancing moral education, i.e., character-building education.

In order not to repeat the mistake made by other countries, Japan should begin to rebuild its moral education as soon as possible.

The first step in that direction is to substantially increase the budget for education to double the number of elementary and middle school teachers.

The idea being that only well-staffed schools can identify the natural talents of each child and unlock them according to his or her own speed of learning.

Children who have grown up in such a flexible educational environment will begin to play an important role in society in ten years.

It takes a surprisingly short time for moral education to start having a favorable impact on society and the economy.