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Forget the bubbly promise of AI, the seductiveness of semiconductors and the gunmetal glamour of defence contractors. Japan’s most revealing stock story of last year was to be found in the aisles of a supermarket chain.
The 101 per cent surge in Aeon shares in 2025 highlights what could be called Japan’s “Goldilocks crisis” — a climate of economic, demographic and political threats that is neither too cold to permit any complacency, nor quite hot enough to oblige radical change, but just the right temperature to stoke the fear that a make-or-break moment is coming. Very possibly in 2026.
Aeon’s stock performance made superficial sense. The company made record operating profits in the first half of its financial year, and expanded its low-cost range. But traditional businesses like this (it is one of Japan’s biggest bricks-and-mortar retailers by store count) rarely receive such huge, concentrated votes of investor confidence — even in a year as joyous for Tokyo-listed equities as 2025.
But a significant additional boost to the shares, said brokers, came in part from the stock’s timely, poignant appeal to retail investors in a country wrestling with inflation, insufficient wage increases and the particular ferocity of rising food prices. Japanese companies have, for decades, offered a rich variety of so-called kabunushi yutai — gifts for individual shareholders that range from food and household products to professional weather data and theme park tickets.
Aeon, according to the many sites that carefully parse the cost-effectiveness of these things, offers one of the best-value examples. For a minimum investment of 100 shares (worth about $1,600 at current prices), shareholders receive various benefits — including generous levels of cashback on everyday shopping at Aeon stores. The retail rush to buy Aeon shares last year (in the face of ever more daunting price-to-earnings multiples on the stock) reveals a swath of middle-income Japan that will do whatever it can to secure even quite modest relief on its food bills. These are households perhaps struggling, at some level, to make ends meet, but with access to the funds required to buy the required minimum of Aeon shares.
Crucially, it is likely that many of these opportunist shareholders occupy a stratum with which the prime minister, Sanae Takaichi, is clearly concerned: those whose wages are not keeping up with inflation, and whose votes are increasingly attracted to populists. Real wages shrank, on a year-on-year basis, in all of the months from January to October last year.
This should come as little surprise. Japanese companies have been paying low wages for years, and got away with it because of the absence of inflation. Labour, despite the size and sophistication of Japan’s economy, has been cheap. This, in turn, dissuaded large parts of the Japanese economy from investing heavily in labour-saving, productivity-raising technology. That strategy has looked increasingly unsustainable for years. It would now be surprising if something did not snap.
Takaichi, meanwhile, has inherited the leadership of a nation battling to cope not just with the rising prices themselves, but with the idea that, having been released from the cage of deflation, prices are not easily tamed. Her popularity is high — so much so that some analysts believe she may risk a snap general election in the spring. But she inhabits a domestic political sphere defined by inflation to a degree not seen for 30 years, and by the threat of electoral punishment for inaction.
She seems to get that, and her immediate focus for reform looks decisive. On December 19, the ruling coalition announced a hefty tax reform plan for the coming fiscal year. The implication of the plan, say analysts, is that Takaichi is unhappy with the way companies allocate financial resources, despite the generous corporate tax rate reductions delivered by previous administrations. They have not raised wages fast enough, and have focused their investments overseas.
A new tax system, according to the plan, will actively encourage companies that have built large cash reserves to invest in domestic research and development and raise wages. Takaichi herself has made it clear she wants companies to raise wages, and is prepared to use tax reforms to further that aim.
Japan’s goldilocks crisis — a shrinking workforce, a visceral horror of inflation and decades of under-investment in productivity-enhancing technology — feels primed to come to a head in 2026. However valid the strategy behind the tax plan and however great the chances of success, its tone makes corporate Japan into a politically useful bogeyman. The nation’s companies must do more, and fast. Even Aeon.
