The end of Japan’s free money era

Insight: The yield on 10-year Japanese government bonds (JGBs) hit 3% this week, the highest level since 1996, as part of a global sell-off in sovereign debt. The reasons are not hard to find: renewed Middle East military strikes are pushing the oil price up again, and the US Federal Reserve is likely to hike rates as soon as mid-September to curb inflation, which would practically force the Bank of Japan to tighten a couple of days later. The stark reality is that governments worldwide are simply spending too much… and Japan is no exception. Prime Minister Sanae Takaichi's government is expected to submit a record budget request of around ¥143 trillion ($890 billion) for fiscal 2027, and bond investors are increasingly uneasy about fiscal discipline.

Impact: For corporate Japan, rising interest rates are manageable for now: large companies have been preparing since 2023, locking in fixed-rate borrowing and passing on higher costs by raising prices. Banks actually stand to benefit from wider lending margins, though they also face unrealized losses on JGB holdings. Overall, that should protect stock prices. The greater stress is on the government. The 10-year JGB yield has doubled since Takaichi took office in October 2025. Interest payments for fiscal 2027 are expected to rise by a quarter, with total debt-servicing costs projected to exceed the entire health and welfare budget. That leaves far less headroom for the consumption tax cuts and growth investments that define her agenda. For the yen, the calculus is double-edged: BOJ tightening would support the currency (though any benefit could be erased by simultaneous US rate hikes). But if fiscal credibility erodes and the bond selloff deepens, the yen is going to face pressure that will make its recent weakness look like child’s play.

Indonesia plans to add 100 GW of solar capacity in just three years, nearly 67 times what it has today, at an estimated cost of $73 billion. The ambition is clear; whether the system can keep pace is another question. Hitting the target would require Indonesia to solve, almost simultaneously, the grid, land, financing, regulatory, and oversupply constraints that have held solar back for years.

Insight: For years, China’s most visible cultural exports struggled to achieve the kind of global reach and appeal enjoyed by K-pop or Japanese anime. Enter the microdrama. Born on platforms such as Douyin and Kuaishou, China’s microdrama industry has spawned a new entertainment format: vertically shot, fast-paced serials catering to the economics and attention patterns propagated by smartphone use. In 2021, the industry was worth about $500 million. Last year, it generated more than $9 billion domestically, surpassing the country’s box office, while the global market hit an estimated $11 billion. In recognition of its growing appeal, even Hollywood studios such as Disney, Fox, and Paramount are now rethinking the economics of their own entertainment models.

Impact: Interestingly, unlike other Asian media exports, China’s is less about the content and more about the operating model. Microdramas radically upend many of the assumptions underpinning traditional entertainment: productions can now cost a fraction of a million dollars, can be filmed in days rather than years, and also use real-time audience behaviour to determine everything from story structure to well-timed brand placement for content monetization. AI, unsurprisingly, is pushing the economics further with Kunlun Tech, a Chinese internet company dominating microdramas for the overseas market, having reduced production costs by 90% due to its use across all areas of production, including audio and video. In many ways, China’s success should come as no surprise: it has built an entertainment model designed for a generation for whom attention is the scarcest commodity. 

Insight: Alo Yoga made its China debut through e-commerce platform Tmall last month, generating a record 10 million yuan ($1.5 million) in sales in just one minute. By Lululemon's clock, the Los Angeles brand is late; by the market's, it is early enough. China's appetite for sportswear is compounding: On Running’s APAC revenue jumped 55% in the second quarter this year, led by China, while Amer Sports, owner of Salomon, grew its China revenue by 36%. On the flip side, traditional market dominator Nike’s China business has shrunk 30% since 2021, while Adidas, which localized harder and faster, has had more success holding its ground. Replacing the swoosh-versus-stripes duopoly is a messier, more crowded field where scale no longer guarantees relevance. 

Impact: Chinese consumers are in their athletic era. Sports participation is at its highest level in decades, and demand has fragmented along with it. Serious runners want maximum performance, while casual buyers want cute yoga pants that they can wear to brunch after pilates. Purchasing athletic wear is no longer about the products but about identity – health, discipline, self-improvement, and staying young. This widens the competitive set dramatically as the relevant rivals are no longer other sportswear labels but every brand selling a credible version of how to live well. For global brands in China, winning that contest demands cultural fluency, not translation, and requires a genuine understanding of how the digitally sophisticated Chinese consumers train, dress, and socialize.

In a small Philippine town called Bamban, a young, pink-obsessed millennial named Alice Guo swept into the mayoralty on a wave of generosity and good vibes: helicopter rallies, Christmas hampers, and a Sesame Street duvet. She also happened to co-own the land behind her office on which a vast human-trafficking and fraud compound was operating, through which $76 million passed and where workers were brutally exploited. The Economist traces how a Chinese-born woman with a forged Filipino identity became a fixer for a transnational criminal network, and why Bamban's residents still put up banners in her support long after she was sentenced to life in prison. It is a story about organised crime, democratic fragility, and the unsettling ease with which both can wear a friendly face.

Read the article here.