New Year’s Message – January 1, 2026

 

New Year’s Message – January 1, 2026
 

Tomo Nakamaru
Former World Bank Economist

 

I. Japan Stands at a “Civilizational Critical Point”

The year 2025 exposed the deepest structural fatigue in Japan’s postwar political and economic system.
Rising inflation, stagnant real wages, fiscal deterioration, political scandals, and monetary policy missteps have converged into what can only be described as a civilizational criticality—a state in which even a small shock can trigger a systemic phase transition.

 

II. From the Reiwa Black Monday (Aug 5, 2024) to the Tariff Shock (Apr 2, 2025)

 

The Reiwa Black Monday of August 5, 2024 was not a mere market fluctuation.
It was a warning sign—a precursor of systemic instability.

The tariff measures announced on April 2, 2025 added a new layer of uncertainty to global trade and finance.
Although markets temporarily stabilized, the episode revealed how fragile the international economic order has become.

 

III. Japan Faces a Binary Choice in 2026

At this critical juncture, Japan has only two paths forward:

Option 1: Abolish the Consumption Tax

Restore disposable income, revive consumption and investment, and rebuild democratic legitimacy.

Option 2: Raise Taxes for Military Expansion

Deepen household distress, suppress consumption, and accelerate institutional decay.

This is not a fiscal debate.
It is a civilizational choice.

 

IV. The History of Interest and the Restoration of Time

Interest is the institution through which civilizations allocate value across time.
Japan’s prolonged zero-rate regime effectively “stopped the clock,”
leading to asset bubbles, currency distortions, and inflationary pressures.

2026 must be the year in which Japan restores the temporal foundations of its economy.

 

V. Overshoot and Collapse: Where Japan Stands

Civilizations that accelerate beyond their sustainable limits enter a phase of overshoot,
followed by collapse unless institutional redesign intervenes.

Japan is now unmistakably in the overshoot phase.

 

VI. The Three Arrows of National Renewal

1. Abolition of the Consumption Tax
2. Normalization of Interest Rates
3. Elimination of Arbitrary Industrial Policy

These reforms form the only viable path toward sustainable recovery.

 

VII. Conclusion

“Japan stands at a civilizational critical point.
The redesign of our institutions is no longer optional—it is imperative.
By restoring time, correcting overshoot, and placing citizens first,
Japan can reclaim a sustainable and dignified future.
The year 2026 will determine that future.”