The year 2026 has begun. For many in Japan, this New Year offered something that had grown rare: time. With the holiday calendar aligning just right, a full week of rest allowed tired minds to reset before returning to work. In an economy long shaped by stagnation, such pauses matter more than we might admit.
As business leaders look ahead, one issue deserves particular attention this year: interest rates.
Japan introduced its zero-interest-rate policy in February 1999, in the aftermath of the asset bubble collapse. What was intended as a temporary stimulus quietly became a defining feature of the economy for nearly three decades. Prices were expected to fall, wages to remain flat, and borrowing costs to stay close to zero. Deflation was not an exception; it was the norm.
That era is now ending.
A combination of forces̶Russiaʼs invasion of Ukraine and the resulting surge in energy prices, disruptions from the pandemic-era global slowdown, a weaker yen, and rising domestic food prices̶has pushed inflation back into Japanʼs economy. Rising prices, in turn, have brought rising interest rates. Long-term rates that once clung to zero have moved into the 2 percent range. By global standards, this remains low. By Japanʼs recent history, it represents a fundamental shift.
For business owners shaped by 30 years of deflation, this change demands a serious rethinking. The assumptions that once guided management decisions no longer apply. The question is no longer how to survive in a world of falling prices, but how to adapt toone in which costs rise year after year.
During the deflationary years, competitiveness often meant cutting prices as far as possible. Today, that mindset is not merely outdated̶it is dangerous. With higher procurement costs, rising labor expenses, and broader inflationary pressure, the challengehas reversed. The task now is how to raise prices sustainably.
In the short term, price increases may be accepted on a provisional, almost apologetic basis. But no business can rely indefinitely on goodwill alone. Lasting price increases require something more durable: improved quality, stronger services, and productsthat genuinely meet customer needs. The goal is to become the company customers say they cannot do without.
Inflation rewards value. In such an environment, the most important decision is to identify what truly matters, invest in it today, and connect that investment to tomorrowʼs revenue.
Finance departments will also feel the shift. Rising interest rates translate directly into higher borrowing costs. Iyo Bank伊予銀行has announced that it will raise its short-term prime lending rate̶from 2.375 percent to 2.625 percent̶starting this February. Long-term borrowing rates are expected to follow. What once felt like a distant macroeconomic issue now appears clearly on balance sheets.
Interest rates are not merely a financial variable; they touch the core of management itself. This is the first major change in economic thinking Japanʼs business leaders have faced in 30 years. It will not be easy. But facing it head-on is the only way forward.
As the new year begins, we move ahead together-aware that the rules have changed, but confident that adaptation, once again, is possible.
