Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Japan spends about $471 billion on healthcare each year.
Despite its shrinking population, Japan still has one of the world’s largest healthcare industries.

Yet healthcare prices in Japan are only about half the average in advanced economies.

The population is shrinking, and prices are low. Yet the industry remains enormous.

Following this structure reveals why Japan chose a healthcare system different from those of other countries and the way of thinking in Japanese society that has supported it for so long.

Subscribe now

Japan Has One of the World’s Largest Healthcare Industries

Japan’s annual healthcare spending ranks roughly fourth in the world.

Source:
OECD, Health Expenditure and Financing
Statistics Bureau of Japan, 2025 Population Census

Japan is also not a country with a growing population.

Even as its population decline accelerates, Japan continues to maintain one of the world’s largest healthcare markets.

Yet Japan’s Healthcare Prices Are About Half the Average in Advanced Economies

When you hear about an industry this large, you might assume that healthcare itself must be expensive.

But the reality is the opposite.

Note:
The latest 2025 edition still uses 2023 as the comparison year. China is not disclosed.
Source: OECD, Health at a Glance 2025 — Prices in the Health Sector

With the OECD average set at 100, Japan was 51.
The United States, by contrast, was 152.

Japan’s healthcare prices are about half the OECD average, which consists mainly of advanced economies.
In other words, Japan’s $471 billion healthcare industry was not built on high prices.

So why is the industry so large when healthcare prices are so low?

How Can Low prices and Huge Work in a Shrinking Country?

Japan did not build a huge healthcare market by selling healthcare at high prices, but by having large numbers of people use healthcare repeatedly.

The biggest reason is that the barrier to using healthcare is low.

Nearly everyone in Japan is covered by public health insurance.
Even when people become sick, they do not have to pay the full cost of healthcare themselves, and patients have relatively broad freedom to choose where they receive care.

Then aging comes into the picture.

As people get older, chronic conditions that cannot be treated in a single visit and the need for continued medical care become more common.

In fact, people in Japan see doctors about twice as often as the average in advanced economies.

Note: People in Japan see a doctor 12.1 times per year on average, compared with an OECD average of 6.7.
Source: OECD Economic Surveys: Japan 2026

In an aging country like Japan, many patients simply require ongoing medical management.

Japan is not a country that controls healthcare spending by preventing people from using healthcare, but one that keeps healthcare accessible to everyone while holding prices down.

The Government Is Actually Keeping Prices Low

Despite so many people using healthcare, prices in Japan do not rise easily.

That is because healthcare prices are not left to the market.

In Japan, the government controls the prices of consultations and surgeries through the medical fee schedule and the prices of drugs covered by insurance through the official drug price system.

Hospitals cannot decide to raise consultation fees by 20% because patient numbers have increased, and pharmaceutical companies cannot freely set the prices of drugs covered by insurance.

In other words, higher demand does not directly lead to higher prices.
Source: Ministry of Health, Labour and Welfare, 2026 Medical Fee Revision

Comparing Japan with the United States shows that Japan’s system is not the norm.

In the U.S. private healthcare market, hospitals and insurance companies negotiate prices.

Even for the same treatment, the price changes depending on which hospital a patient uses and which insurance plan they have.
Hospitals with stronger bargaining power also have more room to charge higher prices.

Japan is the opposite.

Note:
Japan uses nationally standardized official prices.
In the U.S. private insurance market, hospitals and insurance companies negotiate prices individually.
Source: CMS, Hospital Price Transparency

Healthcare providers across Japan generally operate under the same price schedule.

The same surgery does not cost twice as much simply because it is performed at a major hospital in Tokyo, nor does the price of the same treatment change dramatically depending on a patient’s insurance plan.

Why does Japan control prices so tightly?
The reason is to maintain universal health coverage.

In Japan, almost everyone can use public insurance and has relatively broad freedom to visit healthcare providers.

If Japan allowed prices to rise freely without significantly restricting healthcare use, total healthcare spending would increase through both higher utilization and higher prices.

That is why the government controls prices and limits increases in both public insurance spending and the burden on households.

Why Does Healthcare Cost The Same Across Japan?

If the only goal were to maintain universal health coverage, prices would not necessarily have to be uniform nationwide.

Japan could have chosen a system like the United States, where different hospitals and insurance companies are allowed to use different prices.

Japan did not choose that system.

That is because Japanese people feel a strong sense of security in things being the same.

In Japan, fairness and sameness are closely connected.

The same treatment costing twice as much simply because it is provided in Tokyo would feel unusual.
The same surgery costing three times as much simply because it is performed at a famous hospital would also feel unusual.

The price of the same treatment changing dramatically depending on an employer’s insurance plan would also create a clear difference.

Japan’s healthcare system developed in a direction that minimized these differences as much as possible.

There is a clear economic rationale behind maintaining universal health coverage while controlling healthcare spending.
However, behind Japan’s decision to place almost every citizen and healthcare provider under the same rules, and its ability to maintain that system for so long, is a Japanese tendency to associate being treated the same with fairness.

Japanese people were not originally asking for low-cost healthcare.

Japan created a system that everyone could use under the same conditions, and the government kept prices low to preserve that broad access.

That affordability then made high levels of healthcare use possible and created Japan’s unusual Low prices and huge healthcare industry.

But This Success Comes at a Cost

From the patient’s perspective, this system is extremely powerful.

Healthcare prices do not vary dramatically based on income or where someone lives, and people can access medical care relatively freely when they become sick.

But the situation looks different from the perspective of healthcare providers.

Hospitals cannot freely raise the prices they charge for medical services.
Wages for doctors and nurses, medical supplies, food, electricity, and outsourced services all rise at market prices.

The government determines the selling price, but the market determines the costs.

Even if an aging population brings more patients, that alone does not mean higher profits.
Japan’s healthcare system is extremely good for patients.

At the same time, it is quite demanding for those who provide healthcare.

Conclusion

Despite its shrinking population, Japan continues to maintain one of the world’s largest healthcare industries, with about $471 billion moving through the system each year.

What supports this enormous industry is a system that allows a large number of people to use healthcare.
At the same time, the government controls prices so that rising demand does not translate into higher prices.

And the system has been sustained by universal health coverage and the Japanese preference for putting people under the same rules.

This system has allowed Japan to achieve healthcare that is both affordable and broadly accessible.

But on the supply side, where prices cannot be raised freely, rising costs are putting pressure on businesses.

So who is actually capturing the profits in this enormous healthcare market?
In Part 2, we will follow the flow of money from the corporate side.

Subscribe now

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Japan’s long-term fixed mortgage rates have risen from around 1% to around 4% in just five years.

New home prices already exceed seven times annual income nationwide, leaving fewer people able to buy a home, and now interest rates are rising too.

But in fact, 77% of mortgage borrowers in Japan choose variable rates.
Looking only at the surge in fixed rates, that choice seems to have been the right one, but variable rates have now started to rise as well.

Why do safety-conscious Japanese households choose variable rates?
And as both fixed and variable rates rise, how will Japanese behavior toward housing change?

Subscribe now

Fixed Rates Have Reached Around 4% in Five Years

Japan’s mortgage environment has changed in just a few years.

Note: For comparability, the chart uses each bank’s minimum applicable rate for its shortest all-term fixed mortgage option, as of August each year.
Source:
Mitsubishi UFJ Bank
Sumitomo Mitsui Banking Corporation
Mizuho Bank

The Bank of Japan ended negative interest rates and Yield Curve Control, and as long-term interest rates rose, fixed mortgage rates rose across the board.
Source: Bank of Japan, Review of the Monetary Policy Framework

From a U.S. perspective, 4% itself may not look particularly high.

But the scale of the change is striking: in a country where interest rates barely moved for around 30 years, fixed mortgage rates rose from the 1% range to around 4% in just five years.

In Fact, 77% of Japanese Borrowers Choose Variable Rates

This is where Japan’s mortgage market starts to look a little strange.
Around 77% of mortgage borrowers choose variable-rate mortgages.

Note:
Japan: homebuyers with mortgages, Apr–Sep 2024.
U.S.: originated home-purchase mortgages in 2024.
Fixed / Other includes non-variable types.

Source: JHF⁠, HMDA 2024⁠

In the U.S., the picture is almost the reverse, with long-term fixed-rate mortgages at the center of the market.

While U.S. borrowers pass the risk of rising interest rates to lenders, many Japanese households bear that risk themselves.

Looking only at these numbers, Japanese people can appear unusually willing to take interest-rate risk.
Yet 47.2% of Japanese household financial assets are held in cash and deposits, and household investing is extremely conservative.

Japanese households avoid risk with their assets, yet do not lock in the interest rate on one of the largest debts of their lives.

Why do Japanese people choose variable rates so overwhelmingly when it comes to mortgages?

The 30 Years That Made Variable Rates the Right Choice

Japanese people did not always prefer variable-rate mortgages.

Note: Survey periods vary by year: 2005 annual survey; 2010 and 2015 Jul–Oct; 2020 and 2025 Apr–Sep.

Source: JHF Mortgage User Surveys

Around 19% of borrowers chose variable rates in 2005, but by 2010 the share had risen above 60%.

That shift was created by around 30 years of low growth and low interest rates in Japan.

Even when borrowers chose variable rates, interest rates barely rose, and there was no need to switch to fixed rates.

As a result, rather than paying a higher fixed rate to prepare for rising interest rates, keeping current monthly payments low was the rational choice.

The same thinking can be seen in household assets.
Stocks make up only 16.7% of Japanese household financial assets.

Through years of deflation and low growth, Japanese household behavior became less about growing money and more about not losing the money you already have.

Over roughly 30 years, this environment became deeply ingrained in Japanese people.
It became so normal that people even forgot that interest rates were something that could rise.

But now, those rates have begun to rise.

What Will Japanese People Do as Both Fixed and Variable Rates Rise?

Source:
Mitsubishi UFJ Bank
Sumitomo Mitsui Banking Corporation
Mizuho Bank

For new loans in August 2026, variable mortgage rates at Japan’s major banks have risen to around 1% even after preferential discounts.

In Japan, where rates in the 0.x% range were the norm only a few years ago, variable rates are finally starting to become truly variable.

From here, Japanese behavior toward housing could also change.

① Buyers

People looking to buy a home now face a burden whichever option they choose.

A fixed rate protects them from future rate increases, but locks in a rate of around 4% from day one.
A variable rate is cheaper today, but households must absorb future rate increases themselves.

In this situation, the choice that will become more common is Then I just won’t buy a home right now.

② Sellers

For people who already own a home, the hurdle to moving rises.

If they already have a low fixed-rate mortgage, there is little reason to give up those terms.

Even with a variable-rate mortgage, if they own a home with a strong location and high convenience, there is no need to take on both high housing prices and a new mortgage rate just to move.

In other words I can just stay in my current home.

This behavior is not limited to housing.

In Japan, when conditions change, protecting existing wealth is more likely to mean leaving assets where they are than searching for a new place to invest.

Even when interest rates rise, rather than actively reallocating assets into stocks, bonds, or real estate, people leave their money in bank accounts and wait.

That is because, over 30 years of low growth and deflation, doing nothing itself rarely became a major mistake.

Don’t buy a home. Don’t sell the home you already own. Don’t invest in financial products you do not understand.
This is not simply becoming more cautious. It means reducing market participation itself.

In other words, for Japanese people, it is not about how to adapt to rising rates, but about distancing themselves from the very activities that expose them to the effects of rising rates.

Conclusion

What happens in an era of high interest rates is not a uniform collapse in Japanese housing prices.

The less Japanese people buy, sell, and move, the wider the gap becomes between homes that retain value and those that do not.

So what matters from here is not whether to own a home.

It is which home to own.

Which cities will people still want to live in even when interest rates rise, and where will they still be willing to pay high prices for new homes?

The higher rates rise, the clearer the conditions become for the cities that will retain value to the end.

In a previous article, I called the answer old-age infrastructure.

Subscribe now

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

In 2024, Japan’s anime industry market expanded to ¥3.8407 trillion, with the overseas market alone reaching ¥2.1702 trillion.

Japan’s anime market is now larger overseas than at home.
But the real mystery is not the size of the market.

Why do world-famous Japanese anime titles and characters keep emerging even as generations change?

The world has massive film and game industries, yet Japan alone has continued turning fictional characters into global stars for this long.

Distinctly Japanese values are also part of what lies behind this.

And the structure has something in common with America, which has repeatedly produced world-famous entrepreneurs.

Japanese Anime Does Not End with Anime

From 2012 to 2024, the domestic market grew by about 1.5 times, while the overseas market expanded by about nine times.

As global streaming services spread around 2015, a massive distribution network emerged that could deliver anime made in Japan to viewers around the world.

Source The Association of Japanese Animations, Anime Industry Report 2025

As the gateway to the world expanded rapidly, global hits began emerging one after another from the titles Japan already had.

And from those hit titles, even their characters became global stars.

Once a character becomes a star, it is no longer confined to a single anime title.
It moves into games, films, and merchandise, reaching new generations even beyond the lifespan of the original work.

In other words, once an anime becomes a hit, its value expands beyond the animation itself.

This has continued across generations, from Goku in Dragon Ball and Luffy in ONE PIECE to Naruto in NARUTO and Tanjiro in Demon Slayer, with new characters appearing in each era.

If one genius had created a global character only once, talent alone could explain it.

But when the same phenomenon has continued for decades despite different creators, works, and generations, the thing to examine is not one person’s talent.

So where are all these characters coming from in Japan?

Global Characters Are Born from Manga

Japan’s global characters are not first created in anime studios.

Manga comes first.

Not all Japanese anime are based on manga.
There are original anime, as well as works that come from novels and games.

But when we trace Japan’s major IPs back to their origins, a very large number of them begin with manga.

In other words, before going out into the world in Japan, stories and characters pass through another industry, manga.

And even more important is the huge volume of manga that never became anime beneath them.

The Japanese anime visible to the world represents only part of the works that have emerged from this massive manga industry.

So why does Japan have so much manga?

After the War, Japan Was a Manga Artist Factory

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Japan’s capsule toy industry has expanded nearly fivefold, from about ¥38 billion in 2020 to ¥196 billion in 2025.

The force that changed the industry was not children. It was women.

As characters from popular anime and games began appearing inside the capsules, capsule toys evolved from small toys into products that let people keep something they already love close at hand.

So why are adult women in Japan directing so much affection and disposable income toward characters and idols?

The difference lies not in women themselves, but in the barriers to taking a relationship further.

Why a Market That Barely Moved for 20 Years Suddenly Exploded

Japan’s capsule toy industry is expanding at an extraordinary pace.

Note: Data from 2001 to 2020 are based on manufacturer shipment estimates from the Japan Toy Association.
Source: Japan Toy Association, Japan CapsuleToy Association (JACTA)

The industry grew from about ¥38 billion in FY2020 to ¥196 billion in FY2025.

That is roughly fivefold growth in just five years.

Before looking at what caused this boom, there is one uniquely Japanese term worth explaining.

In Japan, a person or character someone especially loves and supports is called an oshi.

Buying merchandise, attending events, and supporting that person or character as part of everyday life is known as oshi-katsu.

In simple terms, it is a culture that turns affection into action and consumption.
And oshi-katsu has had a major impact on the capsule toy industry.

1. Capsules Began to Contain Someone With a Name

Capsule toys were already being purchased by adults long before the current boom.

Miniatures that meticulously recreated food, furniture, and everyday objects were popular even in the 2010s, and the image of capsule toys as cheap products for children had already begun to fade.

But today’s capsule machines are filled with something different.
Characters from popular anime, games, and brands such as Sanrio.
Source: PR TIMES

Once characters entered the capsules, the question was no longer “What is inside?” but “Who is inside?” because what the capsule contained had become someone with a name.

2. Capsule Toys Became Part of Oshi-Katsu

Once characters entered the machines, the meaning of capsule toys changed as well.

In fact, the core consumers in this industry are not children, but women in their 20s and 30s.
Source: ITmedia

Machines that children once turned with leftover pocket change are now being used by women on their way home from work.

What they want is something that lets them attach their oshi to a bag, place them on a desk, take photos with them, and bring them into everyday life.

Capsule toys moved beyond the toy industry and became part of the oshi-katsu economy.

In other words, what drove the industry to nearly five times its previous size was not children’s pocket money, but the wallets of working women.

So why have Japanese women become so deeply engaged in oshi-katsu?

Why Did Japanese Women Turn to Oshi-Katsu?

One major social change has taken place around the world.
Women’s participation in the workforce has become normal.

Marriage once offered more than romance. It also provided economic security.

But when a woman can work, pay her own rent, and support her own life, marriage is no longer essential for survival.

Society has moved from an era in which women had to marry to one in which they can choose only a partner who would genuinely make their lives better.

Online dating expanded in the United States.
In Japan, meanwhile, oshi-katsu grew into a massive consumer industry.

Japan has seen rising rates of unmarried adults, while its aging population and declining birthrate have become major social issues.

That should make online dating, which allows people to efficiently meet many potential partners, especially valuable, yet Japan has not embraced it to the same extent as the United States.

Women became economically independent in both countries.

Why, then, did their paths diverge?

There are two reasons.

1. Meeting People Got Easier, but the Barriers to Taking a Relationship Further Remained

The barrier here is not meeting someone.
It is what comes with taking that relationship further.

In the United States, there are widely accepted options to live together without marrying, have children without marrying, and continue a relationship without marriage.

Japan is different.
One set of data illustrates that difference clearly.

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

In a country with a shrinking population, the era in which buildings sell simply because they are built is over.
However, demand is not disappearing evenly across Japan’s real estate market.

Companies are choosing high-quality offices that help them attract talent, while in the residential market, wealthy buyers and asset-owning generations are choosing high-rise condos where they can continue living into retirement.

When these two patterns are viewed together, the conditions that allow a city to retain value become clear.

The condition is that the office infrastructure needed for work and the retirement infrastructure needed to continue living are concentrated in the same place.

As completed examples of this model, this article highlights Toranomon and Azabudai in Tokyo, and Minato Mirai 21 in Yokohama.

Companies and wealthy buyers appear to choose these cities for different reasons.

However, what both groups are buying is the same.

As the Population Declines, Fewer Buildings Can Sell

As the population declines, fewer people need homes.
Remote work and AI will also reduce the number of people commuting to offices.
Source: IPSS

As a result, buildings that are unlikely to sell are no longer being built in the first place, before their prices ever need to be cut.
Meanwhile, buildings that give buyers a reason to pay a high price attract substantial capital from a small number of buyers.

In other words, real estate demand is not disappearing uniformly.

The market is separating into places that sell and places that do not.

Value Remains Where Two Types of Infrastructure Overlap

Japanese companies are not simply reducing their office space, but are moving into high-quality buildings with superior locations and facilities.

Offices have shifted from boxes designed to accommodate employees to strategic investments for attracting talent.

Companies choose places with good rail access, easy access to business partners, restaurants, hotels, cultural facilities, and environments where talented people want to work.

This is office infrastructure.

Meanwhile, even as the overall supply of new condos contracts, the annual supply of high-end high-rise condo units priced at ¥100 million or more has increased roughly elevenfold over five years.

Their value extends beyond the building itself, with stations, supermarkets, hospitals, banks, shopping facilities, government services, and cultural facilities concentrated within walking distance.

Buyers were purchasing retirement infrastructure that concentrates the urban functions needed to continue living after they stop driving within a walkable area.

In other words, a valuable place is a city where the urban functions needed for work and the urban functions needed to continue living are concentrated in the same location.

What Convenience Really Means

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

As Japan’s population declines and ages, the number of people who need housing is also falling.
The supply of newly built condos has already dropped sharply from 25 years ago.

Yet in major city centers, the supply and prices of high-rise condos continue to rise.

These properties are attracting not only the accumulated wealth of affluent buyers, but also the future income of younger generations taking out 50-year mortgages.

Why is this happening?

All the Arrows Point to Shrinking Housing Demand

As the population declines, fewer people need homes.
Japan is also aging.
More inherited homes are left unused, while fewer households are buying new ones.

That shift is already visible in housing supply.

Note: Units launched for sale as newly built condominiums.
Source: Mitsui Fudosan / Real Estate Economic Institute

In 2025, roughly 60,000 newly built condos were launched nationwide.
Compared with 25 years earlier, more than 120,000 units of annual supply have disappeared.

Yet over the same period, one part of the housing market moved in the opposite direction.

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Population decline. AI. Remote work.
By all logic, offices should have been left with excess space.

But reality has moved in the opposite direction.

In the three major cities, vacancy rates are falling and rents keep rising.

The reason is that offices are beginning to shift from a cost-cutting target to a strategic investment for talent acquisition.

What is happening is not a collapse in office demand.
It is a selection process in which demand concentrates in locations that can attract talent.

So where is the line of selection being drawn?

That is the question this article seeks to answer.

Every Arrow Pointed Toward an Office Collapse

If you look at Japanese real estate roughly from the outside, the population is shrinking, and remote work has spread.

On top of that, AI may reduce routine white-collar work.

Looking only at these three forces, there is almost no reason to be bullish on offices as an asset.

1. Population decline

Note: 2030 to 2070 are estimates
Source:IPSS

Japan’s total population is projected to fall from about 126 million in 2020 to 87 million in 2070, while the share of people aged 65 and older rises from 28.6% to 38.7%.

2. Remote work

Source:MLIT

Work styles have not returned to the past.
Remote work surged during Covid and then settled down after the pandemic, but the share of employed teleworkers nationwide is 25.2%, and has recently started rising again.

3. The AI era

It is still not settled how far generative AI will reduce white-collar employment.
But at the very least, the question of whether routine work can be handled without adding more people will not disappear from executives’ minds.
Source: Stanford DEL

Even so, new office developments continue in the centers of large cities.
So why do companies move into them?

The Numbers Point in the Opposite Direction

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

If perovskite solar cells become widespread, many people will assume one thing.

The companies that make them will win.
But the history of solar panels points to a different answer.

The real value did not go to those who made the panels.
It went to those who turned land into power plants.

And perovskite is fundamentally different from conventional flat panels.

It does not depend on a specific kind of place.

Not only rooftops, but walls, windows, stations, roads, and factories.

So the real question is not who makes them, or who owns the place.

It is who can turn all these different surfaces into power plants.

Chapter One: Where Value Was Really Created in the Solar Boom

First, why did solar panels become a boom in Japan?

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

In the previous article, I described perovskite solar cells as a technology that changes where solar power can be placed.

So why does that where matter so much in Japan?

Because the easy places are already taken.

Japan wants to add more solar power.
But it does not have the land.
It has many mountains, limited flat land, and its cities, farmland, factories, and roads are already filled with other uses.

Then comes another source of pressure.
AI, data centers, and semiconductor fabs.

A country that keeps buying fuel from abroad now wants more electricity, even though it has little land.

At the center of this contradiction sits the perovskite solar cell.

The reason the Japanese government is investing heavily in this technology is not simply because it is new.
It is because this technology fits Japan’s weaknesses almost unsettlingly well.

Limited land, energy insecurity, AI-era electricity demand, domestic resources, and industrial policy.

All of them are beginning to converge around one technology.

Reason 1: The Problem With Conventional Solar Panels

Conventional solar panels are running into three walls.

1. Heavy, rigid panels can only go in certain places

Silicon solar panels were the technology that brought solar power to the world.

But that technology assumes there is suitable space for it, such as large plots of land, strong rooftops, flat surfaces, and locations that are easy to maintain.

Conventional panels are heavy, rigid, and thick.
They are difficult to place on older buildings, roofs with limited load capacity, or the narrow gaps of dense cities.

And in Japan, flat land accounts for only 34% of the country.
Source: NEDO, Solar Power Development Strategy 2025

Still, within that limited land, Japan has already installed a significant amount of solar power.

Note: Comparison based on solar capacity density per land area
Source:
IRENA, Renewable Capacity Statistics 2026
World Bank, Land area (sq. km)

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Solar power already looks like a mature industry.

Panels made in massive factories are installed across open land, rooftops, and utility-scale solar farms.
The image has become familiar around the world.

Yet Japan is now putting serious attention behind a new generation of solar technology.

That technology is called perovskite solar cells.

The promise is not simply a better solar panel. Perovskite could change solar power from something installed only in specific places into a material that can enter cities, buildings, and infrastructure itself.

That is why researchers, companies, and governments are paying attention.

And importantly, the opening chapter of this story begins in Japan.

This article explains what perovskite solar cells are, why they are being discussed as the next shape of the solar industry, and why Japan matters in this story.

The 3.8% Discovery Few People Noticed

Perovskite solar cells did not look like the obvious next winner from the beginning.

If one only looked at the first numbers, this did not seem like a technology that could reshape the global solar industry.

Note:
Conversion efficiency is the share of sunlight converted into electricity.
The chart shows approximate research-cell efficiency records.

Source:
NLR, Best Research-Cell Efficiency Chart
Solar Cell Efficiency Tables, Version 66

In 2009, a Japanese research team reported the use of perovskite as a material for solar cells.

At that time, crystalline silicon solar cells had already reached around 25% efficiency at the research-cell level.
Perovskite solar cells, by contrast, were only around 3.8%.

But what stands out is how quickly it improved after that.

Silicon solar cells were already a mature technology in 2009. Perovskite, however, climbed to the 27% range by 2025.

Researchers around the world improved the material structure, manufacturing methods, and technologies to reduce degradation. As a result, the gap with silicon has almost disappeared.

A technology that once looked weak is now moving closer to becoming one of the leading candidates for the future of solar power.

Perovskite can also be layered on top of a silicon solar cell in what is called a tandem structure.

In theory, this tandem structure could push conversion efficiency to around 43%.
Source: Fraunhofer ISE

The appeal of perovskite is not that it might edge past silicon.

It is that, in a tandem structure, it could lift the ceiling of mature silicon technology.

And Japan was there at the beginning of that story.

How Perovskite Differs from Conventional Solar Panels

The meaning of perovskite is not only about efficiency.

The deeper question is this:

Where can solar power be installed?

Conventional solar panels have mainly relied on silicon.

Silicon-based solar panels became widely adopted around the world because they are efficient, proven, and supported by decades of manufacturing experience.

The constraint is physical.

Conventional panels are heavy and rigid, so solar power usually needs open land, strong rooftops, or enough room for installation.

Perovskite solar cells could change that assumption.

Because perovskite cells can potentially be made thin, lightweight, and flexible, building walls, older rooftops, windows, public facilities, and urban infrastructure could turn into power-generating surfaces — places that were once hard to imagine as solar sites.

This is the real difference from conventional panels.

Perovskite is a technology that could shift solar power from panels placed on land and rooftops to power built into buildings themselves.

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Japan’s regional areas are shrinking as the population declines.

That is an unavoidable reality.

In the next phase, it will no longer be enough to say that regional Japan is shrinking as one single category.

Semiconductors, tourism, AI, defense, logistics, renewable energy, and wealthy migration are beginning to pull people, capital, and industries into places with clear themes.

This is different from the old model of regional development, which relied heavily on attracting factories.

In the coming years,
AI infrastructure, tourism, wealthy migration, and national strategy will widen the gap between places that grow and places that decline.

In other words, even in an age of population decline, regions with clear themes can still create new demand.

This article looks at the regional areas in Japan that may continue to develop in the population-decline era, and the forces behind that change.

Subscribe now

The Essence Is Not in the Numbers

For a long time, Japan’s regional development story was built around population growth, factory attraction, large commercial facilities, and public works.
Source:Regional Economies in Postwar Japan

But in an era when the population is no longer growing, not every region can grow in the same way.

The real issue is not how many people live there, but what exists there.

Four Themes Accelerated by Population Decline

Because Japan’s social structure is under pressure, new forms of demand are emerging.

The regions where that demand remains tend to have four themes.

1. Semiconductors and AI Infrastructure

In Kumamoto and Hokkaido, semiconductor-related investment is already beginning to move local economies.

What the AI era needs is not only factories, but also the massive infrastructure that supports computing power.

That requires regions with stable electricity supply, water resources for cooling, large amounts of land, and high-speed communications networks.

Kumamoto has a concentration of semiconductor-related industries and abundant groundwater, while Hokkaido is also expected to benefit from its cool climate and large land area.
Source:
METI, Japan’s Semiconductor Strategy
JETRO, Hokkaido Semiconductor Investment

Furthermore, demand for data centers, electricity, water resources, and communications infrastructure will spread into construction, logistics, food services, housing, and other areas.

Even in an age of population decline, regions where national-strategy-level infrastructure investment concentrates can create new jobs and demand.

2. Tourism and Foreign Capital

In the past, many tourist areas were built mainly around Japanese travelers.

But in a society with a shrinking population, a model that depends on domestic travelers becomes harder to sustain.

When we look at the world, however, the situation changes completely.

The global population continues to grow, and the middle class and wealthy class are expanding, especially in Asia.

The customer base for regional tourism is expanding beyond Japan and into the world.

Recent inbound demand is shifting from “cheap Japan travel” toward experience-based travel.

The value is shifting from famous tourist spots to local experiences such as skiing, hot springs, nature, food culture, and history.

As a result, housing prices and accommodation costs are beginning to be shaped not by Japanese income levels, but by the spending power of wealthy overseas visitors.

Some parts of regional Japan are now moving not by domestic prices, but by global prices.
Source:Tourism and Land Prices in Japan

Even if the local population is not growing, the regional economy can still change.

3. Wealthy Migration and Older Assets

Even as the population declines, regional Japan still holds deposits, land, real estate, businesses, and other assets.
And in recent years, the movement of people who hold those assets has slowly begun.

In the past, it was rational in Japan to gather in cities for work.

But with the development of communications technology and changes in work styles, the place where people work and the place where they live no longer have to be the same.

In particular, wealthy people and older people are beginning to value not only convenience, but also the living environment itself.

Areas such as Karuizawa and Yatsugatake in Nagano, Hayama in Kanagawa, and Okinawa are not only places for permanent relocation, but regions accessible from the Tokyo area that are beginning to be chosen for comfort and natural surroundings.

As a result, they have become more able to capture demand not only for permanent residence, but also for dual-location living and long-term stays.
Source:Dual-Habitation in Japan

In such regions, what people look for is a healthcare system they can rely on, an environment for raising children and learning, high-speed communications networks, and rich natural surroundings.

Regions with nature, healthcare, and communications infrastructure are more likely to capture new demand.

4. National Strategy

Private companies are not the only force that moves regional economies.

In recent years, national-level strategic investment in areas such as defense, resources, and renewable energy has also begun to move toward regional Japan.

Behind this is a change in the security environment.

Semiconductors, energy, food, and resources have become not only economic issues, but also national security issues.

That is why the government is investing in infrastructure and resource development from a long-term perspective.
But many of these things cannot be achieved in urban areas.

Defense bases require large amounts of land, airports, and ports, while offshore wind power requires sea areas, and coastal areas and remote islands play an important role in the development of seabed resources and rare earths.
Source:
Japan picks 16 airports, ports for defense use
Rare Earths near Minamitorishima
Offshore Wind Areas in Japan

Regions that were not evaluated highly from a purely economic perspective are beginning to be reconsidered from the perspective of national strategy.

National strategy also tends to continue over decades, which means related jobs and demand can flow into regions over a long period.

As a result, ripple effects can emerge across many areas, including ports, airports, construction, logistics, and energy-related industries.

Regions once seen as “remote places far from cities with few people” may be revalued as strategic bases that support security and energy supply.

Regions that the nation needs can gain new roles and new demand.

What Happens to Regions Without a Theme?

In regions that cannot capture demand from semiconductors, tourism, wealthy migration, or national strategy, the effects of population decline and aging are more likely to appear directly.

The real problem is not population decline itself, but the decline in demand.

When young people leave, the region loses workers and consumption at the same time.
As a result, the number of users supporting housing, shopping streets, public transportation, hospitals, schools, and other daily infrastructure also declines.

But even if the number of users falls by half, the cost of maintaining infrastructure does not fall by half.

Instead, the burden per person becomes heavier.

The same applies to regional industries such as regional banks, construction, real estate, retail, and elderly care.

Because the demand that once circulated within the region itself shrinks, economic activity gradually becomes thinner.

From here, the divide will increasingly depend not on whether the population is large or small, but on whether a region can attract new demand from outside.

This demographic pressure is nationwide.

But the difference between regions that are hit hard by it and regions that are less exposed to it will continue to widen.

What Surviving Regions Have in Common

The four themes discussed so far may look like separate stories at first, but they actually share one common point.

They can attract demand from outside the region.

Semiconductors and AI infrastructure bring investment from the state and corporations.

Tourist areas bring travelers from around the world.

Wealthy migration brings assets and consumption.

National strategy brings long-term budgets and jobs.

The point is that regions that are strong in the age of population decline are not necessarily regions with large populations.

They are regions that can draw in outside money, people, and activity.

That is why the regions likely to be valued from here share certain conditions.

Natural environment, transportation access, healthcare systems, high-speed communications networks, and energy supply capacity are among them.

In the age of population growth, these were ordinary forms of infrastructure.

But in the age of population decline, they become sources of competitiveness that attract people and capital.

When thinking about the future of regional Japan, what matters is not only population statistics, but also what kinds of demand the region is connected to.

That will become the new way to look at regional Japan.

Conclusion

As we can see, regional Japan is splitting into two groups: areas where themes are concentrating, and areas that are quietly shrinking.

To understand that split, we need to look at which regions have demand, assets, and national strategy.

We also need to look at how much people and capital are gathering there.

The future of regional Japan can no longer be explained by the word regional alone.

Subscribe now

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specif…

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Rising interest rates are generally a tailwind for the banking sector.

For banks that struggled through Japan’s long era of ultra-low interest rates,
an environment where lending margins can improve is clearly positive.

But for borrowers, higher interest rates also mean higher borrowing costs.

When we look at Japan’s social structure,
not all banks can be optimistic in the same way.

Regional banks are different.

Megabanks have multiple sources of revenue,
including large corporate banking, overseas business, and securities operations.

Regional banks, by contrast,
are built around deep ties with local small and medium-sized companies and individuals.

When the local economy is strong, that closeness becomes a strength.

But when the local economy weakens,
that same closeness can become a lack of escape routes.

And that weakness is starting to become real.

Subscribe now

Bank Profits Are Built on Borrower Costs

Banks collect deposits and lend money to companies and individuals.
The difference between those interest rates is one of the basic sources of bank earnings.

But rising interest rates do not help banks alone.
Behind every bank, there is always a borrower.

For small and medium-sized companies,
higher borrowing costs reduce financial flexibility.
For individuals with loans, they reduce household flexibility.

Of course, not all borrowers suffer at the same time.

Companies that can pass on costs can absorb
the pressure, and individuals can absorb it if incomes rise.
But in weaker regions, the weight of higher interest rates tends to appear with a delay.

Japan’s Regional Economy Cannot Grow Stronger

1. Population Decline

Note:
“Regional Japan” refers to areas outside Japan’s three major metropolitan areas.
Calculated from Japan’s total population and the population of the three major metropolitan areas.

Source: Statistics Bureau of Japan, Population Estimates 2024

Population decline in regional Japan is already happening every year.
From 2015 to 2019, the decline was in the range of 200,000 to 300,000 people per year.
Since 2020, it has expanded to the 400,000 to 500,000 range.

What this population decline means is
that the base for bank accounts, housing loans, and salary deposits is shrinking.
If consumption falls as well, local company sales are also affected.

For regional banks, population decline is no longer a problem that will arrive someday.
It is already here.

2. Successor Shortage

When the population declines,
the number of people who can take over local companies also declines.

At the same time,
younger generations are increasingly moving to urban areas.

This is because jobs in fields such as IT and AI are more likely to be concentrated in cities.

The successor shortage among regional companies is becoming serious.
The average successor absence rate among Japanese companies is above 50%.

In other words, even nationwide, one in two companies has not decided on a successor.
Source: Teikoku Databank, National Survey on Successor Absence Rate 2025.

And this problem is heavier in regional areas.

Note: “Regional Japan” refers to areas outside Japan’s three major metropolitan areas.
Source: Teikoku Databank, Successor Absence Rate Survey 2025.

In 2025, all of the top 10 prefectures by successor absence rate were regional.
In addition, around 60% of regional prefectures had successor absence rates above 50%.

In other words, population decline and the outflow of younger generations are creating a serious successor shortage in regional Japan.

Without a next-generation manager, a company cannot plan for its future.

The more companies face that situation,
the more the number and strength of regional companies are eroded.

3. Small and Medium-Sized Company Bankruptcies

Population decline leads to weaker consumption,
and the outflow of younger generations leads to successor shortages.

At the end of that social structure are small and medium-sized company bankruptcies.

Source: Tokyo Shoko Research, Corporate Bankruptcies FY2025.

The number of corporate bankruptcies in Japan has increased for four consecutive fiscal years since FY2022, while small and medium-sized companies have consistently accounted for more than 98% of bankruptcies.

In FY2025,
the share of small and medium-sized companies reached 100% for the first time in 30 years.

This means that
the borrower base regional banks depend on is beginning to shrink nationwide.

When the population declines, local consumption declines.
When younger generations leave, both workers and successors decline.
As a result, local companies find it harder to secure both sales and people.

For regional banks, small and medium-sized companies are core borrowers.

That is why the decline of these companies eventually comes back to regional banks.

The Hard-to-Close Gap Between Megabanks and Regional Banks

Why does this matter more for regional banks?

Because megabanks and regional banks may both be banks, but their structures are different.

Source:
MUFG, Businesses and Network
SMBC Group, Business Segments
Mizuho Financial Group, Group Companies

Megabanks have broad revenue sources.
Large corporate banking, overseas business, securities,
trust banking, asset management, payments, and market operations.

They can absorb the impact of rising interest rates through multiple businesses.

Regional banks, on the other hand,
are deeply tied to small and medium-sized companies and individuals.

Normally, knowing local companies, business owners,
and local business flows in detail is a strength.

But it also means they directly absorb the weakness of the local economy.

Conclusion

The same tailwind does not necessarily lead to the same result.

In a structure shaped by population decline,
successor shortages, and the decline of small and medium-sized companies,
the key question is whether borrowers can withstand higher interest rates.

Bank profits are built on borrower costs.

Regional banks,
in particular, are highly dependent on the local economy.

That is why I see the tailwind for regional banks turning into a delayed headwind.

In the next part,
I will look at how regional banks may try to survive,
not simply by benefiting from higher rates, but by adapting to a shrinking local economy.

Subscribe now

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Physical AI will be more than a simple response to labor shortages.

In Part 1,
I wrote that Japan is a country that needs “AI that works in the real world” because of aging, labor shortages, and social caution toward relying heavily on foreign labor.

But what truly matters is that Physical AI may begin to change
buildings, logistics, public spaces, and even urban structure itself.

In the past, elevators created high-rise buildings,
and automobiles created a road-based society.

In the same way, new technologies change urban design itself.

And while Japan faces challenges such as aging,
disaster response, and high standards for public services,
it also has accumulated strengths in robotics and precision machinery.

In other words, Japan is not only a country that needs Physical AI.
It may also stand on the side that supports its implementation in society.

Physical AI Will Bring Change to Japan’s Urban Structure

I believe that as Physical AI spreads, it will change Japan’s urban design itself.

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specific security. The views expressed are solely those of the author and are subject to change without notice.

Executive Summary

Physical AI is a technology where AI moves outside
the screen and acts in the real world through robots and machines.

This industry will likely grow in Japan.
That is because Japanese society is reaching a point where it will need Physical AI.

Japan today is facing serious aging and labor shortages,
yet it still relies too heavily on physical labor and human effort on the ground.

To change that society,
Japan needs not only foreign workers, but also Physical AI.

Furthermore,
Physical AI is also important as part of Japan’s government policy direction.

Subscribe now

AI Is Moving Outside the Screen

First, what is Physical AI?
It is a technology where AI recognizes the real world,
makes decisions, and moves through robots and machines.

The first type of AI to gain major attention in recent years was text-focused AI,
especially large language models like ChatGPT.

After that came AI coding assistants,
which raised concerns about the future of some SaaS companies.

And now, AI is trying to move into the real world.

AI sees the real world, makes decisions,
and acts through machines and robots.

That is Physical AI.

Japan Will No Longer Function Through Humans Alone

Japanese society has two serious problems.
They are aging and labor shortages.

1. Aging

Source:World Bank / UN Population Division, 2024

As the chart shows, Japan is a deeply aging society.

In 2024, the share of people aged 65 and older was about 30%,
meaning nearly one in three people was 65 or older.

In the United States, the figure is about 18%.
Even in Italy, which is known as one of Europe’s aging countries, it is about 25%.

Compared with other countries, Japan is aging at an overwhelming level.
And this aging society continues to accelerate, with no clear sign of stopping.

2. Labor Shortages

Next is the labor shortage.
When aging advances,
what becomes necessary is not only nursing care and medical care.
People are also needed to support care, medical, and other essential services.

But in Japan, those people are becoming insufficient.

Source: Teikoku Databank, 2025

Looking at the numbers, the reality is clearly serious.
In 2025, there were 427 bankruptcies caused by labor shortages.

Since 2021, the number has continued to rise,
and from 2023 it has reached a record high for three consecutive years.

This means that, across 2025,
about one in every 24 bankrupt companies failed because of labor shortages.
Source: Teikoku Databank, National Corporate Bankruptcy Report 2025

Moreover, labor shortages are not only a problem for bankrupt companies.

As of January 2026, 52.3% of companies felt a shortage of full-time employees,
meaning more than half of companies saw labor shortages as a management issue.
Source: Teikoku Databank, 2026.1

Foreign Workers or Physical AI

Then, what is the way to solve Japan’s social problems?
In theory, there are two major options.

Greatly increase foreign workers, or supplement labor with Physical AI.

My conclusion is that the answer is to supplement labor with Physical AI.

Of course, Japan will continue accepting foreign workers.
Already, about 80% of Japanese companies want to accept foreign workers,
and companies are moving toward a situation where they cannot function without them.
Source:Reuters Corporate Survey, 2025

However, the fact that companies need foreign workers and the fact that
society as a whole can withstand a rapid increase are two different things.

In fact, about 60% of the public opposes a rapid acceptance of foreign workers.
Source:Yomiuri-Waseda Poll, 2025

In other words, there is a major gap between companies and the public.

This gap is large.
That is because increasing foreign workers
is not only a matter of increasing the labor force.

It is also a matter of making Japan’s living spaces more multicultural.
And it is the public that bears that cost.

Therefore, even if companies want foreign workers, if the public remains cautious
about rapid acceptance, the government cannot move easily.

Foreign Workers Are Not Just a Labor Issue

Why is it difficult to solve labor shortages only through foreign workers?
It is because Japanese society was not built on the assumption of mass immigration.

For companies, foreign workers can become an immediate labor force.
But it also means that Japan’s living spaces themselves become more multicultural.

In other words, Japan depends strongly on “unwritten rules.”
It runs on reading the atmosphere between people and on tacit understanding.
Source:Recruiting Immigrant Workers: Japan 2024

Furthermore, in the United States and Europe,
conservative governments and movements have been
gaining ground, and the Takaichi administration also won a
major victory as a representative of conservatives.

For that reason, it is hard to imagine that only Japan can rapidly
increase foreign labor and solve labor shortages without social friction.

That is why Physical AI becomes necessary.

Conclusion

As the discussion so far shows,
Japan’s structure will reach its limit without Physical AI.

As long as there is a gap in sentiment between companies
and the public, Japan is unlikely to become a country that
absorbs labor shortages through foreign labor alone.

And politicians cannot ignore that gap if they want to win elections.

In Japan, Physical AI will not end as a simple robot boom.

Subscribe now

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specif…

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specif…

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specif…

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specif…

Read more

Disclaimer: This article is provided for informational and educational purposes only and is not intended as investment advice. It does not constitute a recommendation to buy, sell, or hold any specif…

Read more