BCCJ Global Forecast 2025: A Critical Juncture Amidst Major Shifts

Written by Sterling Content

Global trade and geopolitical tensions along with war in Europe and the Middle East have made for a troubling start for Japan’s Year of the Snake. And with the Trump administration’s policies causing financial market chaos, there is little sign of stability returning. How can businesses and investors stay ahead of emerging risks and find opportunities?

To mark the start of Japan’s 2025–26 fiscal year, the British Chamber of Commerce in Japan invited two leading experts, Andrew McDougall, Global Head of Geopolitical Risk at Barclays, and Neil Newman, Head of Strategy at Astris Advisory, to break down the key global developments shaping markets and industries at an event moderated by Heather Prosser, Managing Director of FGS Global.

Assessing the current uncertain situation, McDougall said “80 years of postwar trade and the security infrastructure has disappeared” under the Trump administration’s policy changes.

“The peace dividend from the [Cold] War is gone, and now [U.S. President Donald] Trump is the catalyst who has certainly ushered in a new age … There’s this horrible phrase: ‘Don’t take Trump literally, but take him seriously.’ Actually, take him literally. Every time he speaks, markets react,” he said.

He outlined the Trump administration’s ‘America First’ agenda, which includes deporting illegal immigrants; spurring increased oil exploration to reduce prices; withdrawing from the Paris Agreement on climate change; “major” spending cuts to fund tax reductions; and a new trade and foreign policy that has upended the postwar liberal order.

The US and China

The US–China relationship is “the big issue,” McDougall explained, pointing out it is “going to dominate what happens in the Middle East, Russia, Ukraine and Europe.” 

Trump has imposed onerous new tariffs on China, starting at 54% before escalating to 145%. Beijing has shown little sign of backing down, imposing its own 125% levy on US imports and stating it would “fight to the end” if the US “insists on provoking a tariff war or trade war.”

While McDougall expects the US–China relationship to further deteriorate over the next few years, he pointed to 2028 as a critical year.

“We’ve got the US presidential election that November, the Party Congress in Beijing that October, and the Taiwanese presidential election that same year. So everything from now until then is going to dictate how markets react,” he said.

Nevertheless, McDougall said China has its own problems, including high debt, youth unemployment and demographic issues, which could constrain Beijing’s ambitions of a “Greater China.”

Geopolitical changes

Turning to global conflicts, he said we could expect an attack against Iran’s nuclear programme in the next few months but not expect any “durable peace” or long-term settlement in Ukraine any time soon. 

Due to the Trump administration, Europe’s defence industry is a “big winner” as Germany, France and the UK are all ramping up defence spending to counter Russia and offset an uncertain US alliance, he continued. 

The UK’s relationship with the European Union should also improve ahead of the January 2026 deadline for a new trade agreement, with a new security agreement likely, he said, adding that key areas to watch include gold and oil prices, together with US–China competition over artificial intelligence and advanced chips.

McDougall ended his analysis by forecasting Trump could win the Nobel Peace Prize for a potential Saudi–Israeli normalisation of ties.

“If he can do that, he will actually achieve something that no president has ever done—that is going to be exceptionally stabilising for the Middle East, and for oil and gas,” he said.

The US and Japan

Astris Advisory’s Newman considered the financial market effects of Trump administration policies, particularly their impact on Japan.

As part of Trump’s “Liberation Day” announcement, Japan was hit with 24% tariffs on its US exports, albeit currently paused for 90 days.

“This is the American all-in gamble on the US consumer and how they react … [it’s] worth remembering that the US is self-sufficient in food and fuel, so the basic cost of living for the average family will not be massively impacted,” he said.

Japan’s weighted average tariff with the US amounts to just 1.6%, with zero tariffs on car imports. However, while non-tariff barriers have been a longstanding issue with the US, the continued weak yen is a larger problem, he explained. 

“From 1987 to 2022, the USD/JPY exchange rate averaged 112.50 but between 2022 and 2025 it surged to an average of 144.00, peaking near 160. This imbalance, I believe, becomes the focal point of US–Japan trade negotiations,” he said.

“Pressure will come to strengthen the yen. It’s in Trump’s playbook to encourage a weaker US dollar; he wants to manipulate the currency to improve US exports. The Bank of Japan (BOJ) and the Ministry of Finance are seeking a stronger yen anyway, because they want to reduce import costs—the cost of fuel, food and raw materials has gone through the roof,” he continued, adding that the rising costs have caused problems particularly for Japan’s small and medium-sized enterprises (SMEs), who suffer higher import prices due to a weak yen.

“The Japanese Chamber of Commerce and Industry said last year that they need to see a rate of at least 130 yen to the US dollar for SMEs to reduce their costs and maintain employment—and SMEs employ about 70% of the Japanese workforce,” he said. Strengthening the yen is, therefore, “critical to protect Japanese jobs and increase the purchasing power of the average family” in Japan.

Newman predicted the BOJ policy rate would reach 1.5% “within a year,” responding to increased US pressure, which could lead to the yen climbing to around 130.

“It will mean that the Japanese yen will be the best-performing currency globally this year … which is great if you want to invest in Japan and do business in Japan,” he said.

Pointing to the benefits of Japan’s overseas investments, Newman said Japan remained “an oasis of political stability” in addition to being financially stable. Key sectors for investors include defence, where Japan is set to become the world’s third-largest spender by 2027, together with AI, robotics, renewables and nuclear energy, he added.