“Even if Trump loses, there’s no room for complacency”: Japanese media wary of AI regulation and pressure over defense spending [U.S. midterm elections]

【Financial News, Tokyo = Correspondent Seo Hye-jin】As Democrats looked poised to regain majorities in both chambers of Congress in the U.S. midterm elections, Japanese media focused on the impact on their country’s economy and security. Japanese AI and semiconductor stocks plunged amid concerns that Democrats could put the brakes on data-center expansion, which has fueled rising electricity bills. Some also predicted that President Donald Trump, facing congressional scrutiny, could step up pressure on allies to seek breakthroughs in foreign policy and trade.

On the 4th, the Nihon Keizai Shimbun (Nikkei) reported that selling of AI and semiconductor stocks spread across the Tokyo market as news of Democratic gains in both chambers heightened concerns about regulations on data-center construction.
In the United States, voter frustration over the huge power demand from AI data centers and rising electricity bills has emerged as an election issue. Unlike the Trump administration, which has made AI investment a driver of growth and leaned toward deregulation, Democrats are cautious about rapid development. Expectations that control of Congress could give them greater scope to tighten regulation and oversight of data-center construction dampened investor sentiment.
As of 2 p.m. that day, the Nikkei Stock Average (Nikkei 225) was trading in the 61,200s, down about 1,900 points from the previous trading day. During the session, a sharp drop in AI and semiconductor stocks drove the decline past 3,000 points, threatening even the 60,000 mark. The losses later narrowed as buyers moved into related stocks, amid a view that the bad news had already been priced in, at least for now.
The Nikkei said the midterm elections were shaking investors’ optimism that the rapid expansion in semiconductor demand would continue. The results of gubernatorial elections in Texas and Ohio, where data centers are concentrated, were also cited as factors that could affect future construction projects.
The Asahi Shimbun also focused on concerns that tighter regulations could reduce the profitability of AI investments. Quoting an analyst at a major asset management firm, the paper reported: “Market anxiety is growing that massive AI investments could be held back by regulation and fail to generate as much profit as expected.” Indeed, AI and semiconductor-related stocks, including Advantest, SoftBank Group and Tokyo Electron, led the market’s decline that day.
However, some analysts said it was too early to conclude that growth in the AI industry would lose momentum. Takuma Ikemoto, an analyst at Tokai Tokyo Intelligence Lab, said, “The United States cannot stop developing AI, even from a national security standpoint.” He added that selling by short-term investors had also contributed to the decline in share prices.
The Asahi also raised the possibility that curbs on expanded U.S. fiscal spending could ease upward pressure on long-term interest rates. The paper said expectations of improved fiscal health could push down U.S. Treasury yields and affect Japanese interest rates as well.

In diplomacy and security, concerns emerged that President Trump could avoid congressional scrutiny by taking a harder line abroad. The more difficult it becomes to pass legislation and budgets, the more he may seek results in foreign policy, where the president has relatively greater discretion.
The Asahi, quoting a senior official at the Japanese prime minister’s office, reported: “If Congress does not act, President Trump could channel his energy into other areas, such as foreign policy and security.” It also voiced concern that he might strike deals that exclude Japan while rushing to improve relations with China and Russia or pursue dialogue with North Korea.
The issues currently keeping the Japanese government on alert are defense spending and negotiations over Japan’s share of the costs of stationing U.S. forces in the country. Another senior official at the prime minister’s office expressed concern that “President Trump could step up pressure so he can say he got money out of Japan.”
Japan plans to revise three security-related documents by the end of the year and conclude negotiations over its share of the costs of stationing U.S. forces in Japan for fiscal 2027 and beyond. Since the Trump administration has been urging allies to spend 3.5% of GDP on defense, both issues are expected to reach a critical juncture in talks with the United States.
The Sankei Shimbun pointed to the possibility of a setback in securing the U.S. defense budget. The Trump administration has requested a fiscal 2027 defense budget of $1.5 trillion, up 42% from the previous year (about 2.0112 quadrillion won), but Democrats oppose it, making the proposal difficult to pass in its original form, the paper said.
The Sankei reported, citing the U.S. political publication Politico, that the U.S. Department of Defense had begun preparing for a $400 billion cut to its request (about 536.32 trillion won). It predicted that constraints on the defense budget could also affect U.S. military operations around the world, including in the Indo-Pacific.
Uncertainty could also increase in trade, one analysis said. The Asahi raised the possibility that President Trump would rely more heavily on tariffs, a policy less constrained by Congress. In particular, it noted that Japanese automakers with production bases in North America could face a greater burden, given Trump’s announcement that tariffs on cars made in Canada would rise from the current 25% to 50% starting next January.
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