What explains Japan’s popularity? Japan’s annual inflation rate has been hovering above 3% (3.1% in July 2025 from 3.3% in the previous month). Japan’s interest rates have moved from a negative 0.1% to a positive 0.5%, their highest level in more than a decade. Japan’s economy expanded 0.3% in the second quarter of 2025 from the previous first three months, outpacing forecasts and the 0.1% growth seen in the first quarter. It had been thought that the Japanese economy would be particularly vulnerable to tariffs given the importance of its export sector.