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Japan’s foreign reserves rose to $1,394.8B in January from $1,369.8B previously—an increase of about $25.0B. A larger reserve buffer strengthens Japan’s capacity to manage FX volatility if needed and is generally a marginal positive for JPY confidence, though day-to-day yen moves will still be driven mainly by rate differentials and risk sentiment.

Japan’s household demand weakened sharply at year-end. Household spending fell -2.6% YoY in December (vs -0.5% expected, +2.9% prior) and dropped -2.9% MoM (vs -1.3% expected, **+6.2% prior). The double miss and reversal from November’s strength point to a meaningful cooling in consumption momentum—an important headwind for near-term growth. For JPY, softer domestic demand can reinforce a more cautious policy narrative unless inflation/wages stay firm enough to keep normalization on track.

Japan’s 30-year JGB auction cleared at 3.615%, up from 3.447% previously (about +16.8 bps). The higher stop-out yield signals renewed pressure at the long end—investors demanded more compensation to hold duration—an important read for Japan’s rates curve and for JPY sentiment, especially if markets interpret it as rising term premium rather than orderly normalization.

Foreign investors sharply increased purchases of Japanese assets, with net foreign buying of Japanese bonds at ¥713.7B (vs ¥190.4B previously) and net foreign investment in Japanese stocks at ¥494.6B (vs ¥329.5B previously). The surge signals stronger overseas demand for Japan exposure; for JPY, the impulse is generally supportive, though the FX impact can depend on how much of the flow is currency-hedged and whether bond inflows compress yields or reflect a broader risk-on rotation into Japanese equities.

Japan’s services-led momentum firmed in January. The au Jibun Bank Services PMI rose to 53.7 (vs 53.4 expected, 51.6 prior), while the Composite (Manufacturing & Services) PMI climbed to 53.10 (vs 52.80 expected, 51.10 prior). Both readings staying comfortably above 50 signal broader private-sector expansion, with services continuing to do the heavy lifting—an incremental positive for growth sentiment tied to the JPY backdrop.

Japan pushed agricultural/forestry/fishery exports to record levels across multiple markets in 2025, including United States, Taiwan, and South Korea. Shipments to the U.S. rose 13.7% to ¥276.2bn, keeping it Japan’s top destination for a second year, helped by strong green tea and beef demand despite tariffs introduced in April. Exports to China rose 7.0% to ¥179.9bn, rebounding after a 29% slump in 2024, supported by higher shipments of ornamental koi, beer, and logs. China had suspended all Japanese seafood imports after Tokyo Electric Power Company began releasing treated water from the Fukushima Daiichi Nuclear Power Plant in August 2023; the ban was eased in mid-2025 but some restrictions remain, and Kazuyoshi Nakasugi said seafood exports to China still haven’t recovered much. Japan is therefore pushing seafood-market diversification elsewhere in Asia and the U.S.; by product, beef, rice, green tea, and yellowtail posted record export values in 2025.

Japan’s exports of agricultural, forestry and fishery products climbed 12.8% in 2025 to a record ¥1.701 trillion ($10.9bn), up from ¥1.507 trillion in 2024—marking a 13th straight annual increase, according to Ministry of Agriculture, Forestry and Fisheries. The gain was driven by stronger shipments to the United States despite new tariffs introduced in April, alongside a rebound in exports to China after the prior year’s slump. Kazuyoshi Nakasugi cited rising global interest in Japanese cuisine, greater food awareness among inbound tourists, and growing health consciousness, with record exports also noted to markets such as Taiwan and South Korea.

Japan’s monetary base fell 9.5% YoY in January (vs -10.3% expected, -9.8% prior), showing liquidity is still contracting but at a slightly less negative pace than both forecast and the previous print. At the same time, the 10-year JGB auction yield rose to 2.249% from 2.095% prior (about +15 bps), pointing to firmer long-end funding costs and ongoing pressure on the curve as markets re-price rates and term premium. The combination suggests monetary accommodation is continuing to unwind while bond-market conditions remain sensitive—keeping attention on Bank of Japan policy signaling and demand for duration.

Japan’s au Jibun Bank Manufacturing PMI held at 51.5 in January (in line with 51.5 expected) and improved from 50.0 previously, keeping the sector modestly in expansion territory and signaling that manufacturing conditions firmed after hovering around the breakeven line.

Japan’s housing starts fell -1.3% y/y in December, a much smaller decline than the -4.5% expected and a clear improvement from -8.5% previously—suggesting the housing downturn is moderating. Meanwhile, construction orders jumped 20.2% y/y, sharply above the 9.5% prior, pointing to a stronger pipeline of projects and better forward activity for the sector.

Japan’s 2-year JGB auction cleared at 1.253%, up sharply from 1.129% previously, signaling a notable repricing higher at the front end. The move is consistent with firmer short-term rate expectations and/or reduced demand at auction, as markets continue to adjust to BoJ normalization risks and recent FX volatility.

Japan’s industrial production in December edged down just -0.1% m/m, beating expectations (-0.4%) and sharply improving from -2.7% previously, suggesting the manufacturing drag eased into year-end. But the forward guidance is choppy: the production forecast shows a +9.3% m/m jump one month ahead (Jan) (vs +1.3% prior reference), followed by a steep -4.3% m/m drop two months ahead (Feb) (vs +8.0% prior reference), highlighting high uncertainty and potential payback effects.

On the demand side, the tone is weaker. Retail sales fell -0.9% y/y in December, missing expectations (+0.7%) and reversing from +1.1% prior, while large retailers’ sales dropped -2.0% m/m (vs +0.7% prior). Even though large-scale retail sales were +2.0% y/y (down from +5.0%), the broader consumer signal is that spending momentum softened materially into year-end.