Core Viewpoint - Japan's economy is experiencing a "new normal" characterized by inflation, labor shortages, and rising wages, coinciding with a significant political transition as Shigeru Ishiba steps down and Sanae Takaichi is elected as the new president of the Liberal Democratic Party [1][7]. Group 1: Economic Policy and Market Reactions - The stock market welcomed Takaichi's advocacy for "responsible active fiscal policy," while the bond market expressed concerns over potential increases in government bond issuance [1]. - Despite Ishiba's lack of focus on economic policy, the Nikkei average stock price reached historical highs during his tenure, indicating a paradox in market performance [3]. Group 2: Software Investment Trends - The Bank of Japan's September survey revealed explosive growth in software investment among companies, with large enterprises planning a 10.7% increase in 2025, while medium-sized and small enterprises plan increases of 14.6% and 28.1%, respectively [3][5]. - In contrast, software investment among medium-sized and small enterprises saw declines of 4.8% and 6.4% in 2024, highlighting a significant shift in investment strategy for 2025 to address labor shortages [3]. Group 3: Industry-Specific Insights - The wholesale and retail sectors are projected to increase software investment by 39.5% in 2025, recovering from a 23.9% decrease in 2024, while the accommodation and food services sector is expected to shift from a slight decrease to a 39.5% increase [5]. - The Bank of Japan's report emphasizes that investments should not only address immediate labor shortages but also enhance marginal productivity, aligning with the goal of achieving a nominal GDP of 1,000 trillion yen by 2040 [6]. Group 4: Future Economic Outlook - Despite Japan's declining population, achieving an average nominal investment growth rate of 4.0% could lead to a nominal GDP growth of 3.1% annually, with real GDP growth projected at 1.7% [6]. - The current economic transformation presents an opportunity for the new administration to capitalize on these trends, potentially benefiting businesses and the general public [8].