PESTLE & MORTAR 09 October 2025

#1

Japan Likely to Elect Thatcherite Figure

Sanae Takaichi has emerged as the likely next Prime Minister of Japan after securing victory in the Liberal Democratic Party’s (LDP) leadership race, defeating Shinjiro Koizumi in a runoff. Under Japan’s system, the leader of the ruling party is nominated by parliament, and with the LDP still dominant, Takaichi is expected to be confirmed by the National Diet in the coming weeks, though her party no longer holds a secure majority. This means she will need to rely on coalition partners or strike deals with opposition lawmakers to push through her agenda. Outgoing Prime Minister Shigeru Ishiba will step down once the Diet formalizes her appointment, allowing Takaichi to form her cabinet. She has already signaled a mix of continuity and pragmatism by naming influential figures like former Prime Minister Tarō Aso as LDP vice president and Shunichi Suzuki as secretary-general, moves designed to shore up party unity and market confidence. Even so, investors reacted with caution, sending the yen down and bond yields up, indicating fears that her fiscal and monetary policies may tilt toward expansion and add pressure on Japan’s already fragile financial stability.

The challenges Takaichi faces are formidable. Japan continues to struggle with weak growth, persistent demographic decline, and one of the world’s heaviest public debt burdens. She has promised to inject stimulus and ramp up public investment in strategic sectors like semiconductors, biotech, green technology, and defense, but will need to balance these ambitions against fears of runaway borrowing costs. Her stance suggests coordination difficulties with the Bank of Japan. While she leans toward fiscal loosening, the BoJ faces mounting pressure to raise interest rates to contain inflation, risking currency depreciation and higher import costs. Indeed, the yen has already weakened on expectations of softer monetary policy, benefiting exporters but adding strain to households and import-dependent firms. Beyond these macroeconomic tensions, Takaichi inherits a structural reform agenda long delayed for  revitalizing productivity, addressing labor shortages, encouraging immigration or workforce participation, and modernizing corporate governance. All of this will have to be pursued without a secure legislative majority, meaning her economic program could be watered down by opposition pushback or coalition demands. Coupled with her hawkish security posture, likely to raise defense spending and complicate relations with China, Takaichi’s tenure will demand careful management of fiscal credibility, market confidence, and coalition politics as she seeks to chart a sustainable path for Japan’s economy.

#2

French Politics Increasingly Unstable

France has entered a deepening political crisis following the collapse of Prime Minister Sébastien Lecornu’s government just hours after its formation, demonstrating President Emmanuel Macron’s inability to command a stable parliamentary majority. Efforts to negotiate cross-party support are faltering, with the Socialist Party pledging to oppose the government and the far-right National Rally refusing to join talks. This paralysis stems from the fragmented outcome of the 2024 snap elections, leaving the National Assembly divided between centrists, the left, and the far right. With Macron rapidly running out of options, the possibility of a technocratic caretaker administration or another snap election looms, both of which carry high risks as a caretaker would lack authority to pass reforms, while new elections could deliver a decisive victory to Marine Le Pen’s National Rally. The instability threatens to stall key policy initiatives on pensions, fiscal consolidation, and structural reforms, while also straining France’s role in the EU and raising doubts about European stability as a whole. Markets have responded with sharp volatility. The CAC 40 fell, banking stocks lost between 3–5%, French sovereign bond yields spiked, and the euro weakened, reflecting investor concerns about fiscal credibility and policy paralysis. For corporations, this environment introduces problems: borrowing costs are rising, public procurement and infrastructure projects may face delays, and abrupt tax or regulatory measures cannot be ruled out as the state seeks to manage deficits. Multinationals may hedge or delay investments in France, while domestic firms face pressure from higher financing costs and policy unpredictability. In the months ahead, political gridlock is likely to persist, markets will remain volatile, and pressure will build for either snap elections or a caretaker government. Both paths carry implications for business, ranging from protracted uncertainty to a sharp political realignment if populist forces consolidate power.

#3

Chinese Influence Operations

According to new reporting, China’s embassy in Manila hired a local firm, InfinitUs Marketing Solutions, to run inauthentic Facebook and X accounts, set up a proxy outlet branded as “Ni Hao Manila,” and push narratives that undermined the U.S.–Philippines alliance, disparaged Western COVID-19 vaccines, and cast doubt on Manila’s maritime claims; internal documents and former employees described a coordinated “troll army” that amplified pro-Beijing content and targeted critical lawmakers, while a CCP-linked awards program distributed thousands of dollars to Filipino officials and media personalities; platforms removed some of the identified accounts after being alerted, Beijing denied interference, and Philippine lawmakers are pursuing stronger rules on foreign interference and disinformation. Analytically, the case illustrates key features of contemporary PRC influence tradecraft by outsourcing operations to local fronts for plausible deniability, blending security and public-health themes to widen reach, orchestrating cross-platform amplification cycles, cultivating elite validators through money and prestige, and exploiting legal and regulatory gaps. The operational aim is to erode alliance cohesion and narrow Manila’s policy options while keeping fingerprints faint. Practical indicators to monitor elsewhere include sudden engagement spikes on embassy-adjacent content, emergence of “local” media with lopsided metrics, cash-award or NGO pipelines tied to PRC-linked bodies, and synchronized comment storms around flashpoints such as U.S. deployments or maritime incidents. Even if polling remains favorable to the alliance in the near term, persistent low-grade campaigns can shift media ecosystems over time, which argues for coordinated platform enforcement, transparency requirements, proactive counter-narratives, and civic resilience programming.

#4

Private Credit Pivots to Emerging Markets

Private credit investors are pivoting away from saturated Western markets and increasingly channeling funds into emerging economies, where demand for financing is high and yields are more attractive. Firms like PIMCO, Ninety One, and Gramercy are scaling up their commitments, with projects ranging from Angolan refineries to Turkish infrastructure. Unlike the U.S. and Europe, where competition has compressed returns and defaults have risen, emerging market borrowers are viewed as fundamentally conservative and accustomed to volatility. Many of these loans are asset-backed, giving creditors direct claims on infrastructure, equity, or revenues. For companies in emerging markets, private credit provides an alternative to bank loans and shrinking bilateral aid, enabling access to large-scale financing on bespoke terms. This could accelerate infrastructure development, expand corporate balance sheets, and foster more direct foreign partnerships. Opportunities will exist in the form of new joint ventures, supply chain expansion, and higher yields on corporate bonds; risks in potential crowding-out of traditional lenders, heightened exposure to political and regulatory environments, and the possibility of distortions if private credit substitutes for sovereign borrowing. For Western corporations, especially in finance and construction, this shift signals that growth and deal-making may increasingly lie outside developed markets, but will require higher tolerance for complexity, bespoke structuring, and geopolitical risk.

#5

Canada Increasing Investments in Defense

Canadian investors are moving toward defense, construction, and resource stocks as Prime Minister Mark Carney commits to rapidly increasing defense spending and fast-tracking major infrastructure projects. Ottawa will hit NATO’s 2% of GDP military target five years early, while also launching a Defence Investment Agency to accelerate procurement of submarines, aircraft, ships, drones, and sensors. The government is also prioritizing projects to expand mining, natural gas, and port infrastructure to diversify the economy and reduce reliance on the U.S. Defense firms like Bombardier and Kraken Robotics, engineering groups such as WSP Global and Stantec, and metals producers are already seeing stock gains. Companies in aerospace, defense, and advanced manufacturing stand to gain from assured procurement contracts and domestic-sourcing rules, while construction, engineering, and heavy machinery firms will benefit from expedited infrastructure approvals. Mining and materials companies could see regulatory barriers eased, boosting production of metals critical for defense and industrial supply chains. Canada’s pivot signals both new partnership opportunities and a potentially more protectionist procurement environment. More broadly, corporations with exposure to Canadian supply chains may face tighter government direction of resources, but those positioned in defense, construction, and extractives could capture significant growth as Canada undertakes large-scale nation-building and aligns more deeply with NATO defense pledges.

#6

Australia’s Defense Pact with Papua New Guinea

Australia and Papua New Guinea (PNG) have signed the “Pukpuk Treaty,” a mutual defense pact committing the neighbors to closer military cooperation. The treaty includes interoperability between their forces, access for 10,000 PNG citizens to serve in the Australian Defence Force, and plans for PNG to grow its own forces to 7,000 troops. Although PNG’s Prime Minister James Marape downplayed geopolitical motives, the agreement clearly reflects intensifying competition with China in the Pacific. Beijing has expanded economic and security ties across the region, prompting Canberra to consolidate its role as the key security guarantor. This treaty cements PNG within Australia’s and by extension, the Western alliance’s security orbit, reinforcing the regional architecture around the U.S., Japan, and India (Quad partners). It strengthens deterrence against China’s growing presence in the Pacific, particularly after Beijing’s security agreement with the Solomon Islands. For small island states, it signals that defense partnerships can yield training, migration pathways, and economic benefits, making Western ties more attractive than Chinese overtures. In addition, the pact suggests greater stability in PNG, potential infrastructure and defense investment opportunities, and a business environment increasingly aligned with Western standards. Strategically, it highlights that the Pacific Islands are not peripheral but central to Indo-Pacific geopolitics, where major powers are competing to secure military access, political loyalty, and control over vital sea lanes.

#7

Russia Backs Venezuela After U.S. Strikes

Since Trump’s new executive order designating cartels as terrorists, US strikes have killed at least 21 people this month, all at sea and through drone attacks. Washington has not provided evidence of drug trafficking. The most recent strike occurred off the Venezuelan coast, and these events have created widespread fear inside the country. Venezuelan Foreign Minister Yvan Gil Pinto expressed his position to Sergey Lavrov, the Russian Minister of Foreign Affairs. According to Lavrov, the two ministers voiced deep concern about Washington’s escalating actions in the Caribbean Sea. They warned that these developments could have far-reaching consequences for the stability of the region. Russia has since been vocal their support for Venezuela, framing the situation as an example of US aggression that must be countered through strong alliances. President Nicolas Maduro has continued to allege that the United States is seeking to drive him from power. Venezuelan Defence Minister General Vladimir Padrino said that when the country faced what it described as an illegal incursion by US warplanes near its borders, the strikes amounted to a vulgarity, a provocation, and a direct threat to national security. Washington has defended its actions by citing the US Constitution, presidential war powers, the classification of cartels as foreign terrorist organizations, the right to self defense, and international law on unlawful combatants. Trump has repeated that the issue must ultimately be resolved on land. Critics warn that this approach risks escalation and could lead to greater military involvement across the region.

#8

Indonesia’s Critical Minerals

Indonesia’s crackdown on illegal tin mining has triggered a sharp market reaction, with the London Metal Exchange tin price rising to $37,000 per metric ton, the highest value since April. Jakarta’s move to reassert control over the deregulated sector threatens the closure of thousands of small, non-state-owned mines, which contributes to 80% of tin production in the Bangka-Belitung region. While targeting illegal extraction brings revenue back to the state, improves traceability, and enhances miner safety, it deconstructs the tin shadow sector, which produces over 12,000 tons of tin each year, mostly imported by China. Additionally, although Indonesia only permits refined exports, both China and Malaysia report thousands of tons of tin ores and concentrates entering their supply chains. The crackdown threatens firms relying on legal and illegal tin to secure materials for the growing semiconductor, EV, and tech industries. Governments asserting control over critical mineral sectors is not an isolated trend. The Democratic Republic of Congo, which holds 70% of global cobalt reserves, imposed a 7-month export ban to counter China's supply chain dominance and market oversupply, compelling states and industries to diversify their suppliers, establish alternative trade routes, and fund new battery technologies. While these measures strengthen resilience, they increase production costs, as demonstrated this week by the 10% increase in tin prices. As such, China's control of critical minerals, Indonesia and Africa's resource nationalism, and social unrest, as seen in the DRC's evacuation of the Bisie Mine due to a local M23 insurgency, all strain supply chains and fuel market volatility. States and corporations must balance production needs with compliance risk, supply diversification, and long-term security investments to ensure stability in the minerals landscape.

#9

Geopolitically Motivated Cyberattacks Increase

Companies are increasingly caught in a cyber threat environment shaped by both financial motives and geopolitical agendas, placing them at the intersection of state rivalries and criminal opportunism. Cyber campaigns now frequently follow political events, such as the surge of distributed denial-of-service attacks against U.S. and European targets after public support for Ukraine, demonstrating how digital operations are used as instruments of retaliation and signaling in international disputes. At the same time, state-sponsored hackers have grown more sophisticated, deliberately planting false digital fingerprints to misdirect attribution and manipulate perceptions, a tactic that risks escalation if governments blame the wrong actor. Smaller but strategically positioned states, like Singapore, illustrate the pressure points in this landscape: its energy and healthcare sectors have faced direct assaults from advanced groups such as UNC3886, prompting authorities to publicly name attackers as both a deterrent and a way to prepare citizens for heightened security measures. These dynamics transform cybersecurity from an operational challenge into a strategic consideration for boards and executives, who must calculate the trade-offs between innovation, competitiveness, and resilience in the face of potential losses running into tens of millions of dollars. Generally, the rise of cyber as a tool of statecraft highlights its dual role as both a weapon and a signal, shaping alliances, influencing markets, and creating systemic risks. Analysts must therefore interpret cyber operations not only as technical incidents but as deliberate geopolitical actions that reveal intent, test thresholds, and redefine the boundaries of conflict in the digital age.

#10

UK’s Trade Deal with India

Prime Minister Keir Starmer’s two-day trip to India follows a newly signed UK-India trade agreement that cuts tariffs and broadens market access, with London projecting up to £25.5 billion in additional bilateral trade by 2040. For the United Kingdom, lower duties on exports such as whisky, autos, and industrial goods, plus a push to deepen services and finance ties, could lift regional manufacturing, stimulate inward Indian investment, and help rebuild post-Brexit trade momentum, though near-term gains will depend on tackling non-tariff barriers, rules-of-origin frictions, and implementation delays. For India, the deal promises stronger demand for labor-intensive exports like textiles and food products, potential job creation across supply chains, and greater British investment and technology transfer in high-value sectors such as clean energy, pharmaceuticals, and tech. Expanded air connectivity and executive-level outreach aim to accelerate commercial uptake, yet logistics constraints, compliance costs, and exchange-rate volatility could temper results. Net effects will hinge on how quickly both sides ratify and operationalize the agreement, align regulatory standards, and mobilize firms to use the new preferences; if executed well, the pact can diversify UK markets and upgrade India’s export mix while deepening two-way capital, services, and innovation flows.

#11

Workers Share Sensitive Information with AI

A recent study reported by WebProNews shows that 43% of employees admit to sharing sensitive company information with generative AI tools, exposing firms to serious security risks. Workers are inputting internal documents, financial data, client details, and proprietary research into third-party systems, often without oversight or policy guidance. Because these platforms may store or reuse data for training, companies face the possibility of leaks, intellectual property loss, and regulatory violations, particularly in industries bound by strict privacy and compliance rules. This trend effectively creates “shadow AI” environments beyond the reach of corporate security, lowering the barrier for insider threats and making accidental data exposure far easier. The reputational consequences are also significant, as clients and partners may lose trust if their data is mishandled. Corporations will need to consider how AI usage must be governed by formal policies, training, and technical controls. Firms need enterprise-grade AI solutions with strict data protections, monitoring mechanisms, and explicit restrictions on what information can be used. Ultimately, managing the intersection of AI adoption and security requires embedding AI governance into existing risk frameworks to ensure innovation does not come at the expense of confidentiality, compliance, or competitive advantage.

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