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Japan’s inflation strengthened in October, signaling persistent price pressures. The National CPI rose 3.0% YoY, up from 2.9%, while Core CPI (excluding fresh food) also came in at 3.0% YoY, matching expectations and slightly above the previous 2.9%.

On a monthly basis, CPI increased 0.4%, accelerating sharply from 0.1%, while the non-seasonally adjusted CPI jumped 0.7% MoM, reversing the prior 0.1%- decline.

The data points to firming consumer inflation, driven by higher energy costs, services prices, and a weaker yen feeding into import prices. The continued pickup may increase pressure on the Bank of Japan to further adjust its ultra-loose policy stance.

Market impact: Mildly positive for JPY; firmer inflation strengthens expectations of gradual BoJ normalization.

Japan’s latest weekly flow data showed a sharp contrast between equity and bond investment trends. Foreign investors bought ¥1,020.9B worth of Japanese stocks, a strong reversal from the previous ¥-346.6B outflow, highlighting renewed confidence in Japan’s equity market.

However, foreign purchases of Japanese bonds fell to ¥348.4B, down from ¥566.5B, indicating softer appetite for Japan’s fixed-income assets as yield differentials remain wide.

Market impact: Mildly positive for JPY and Japanese equities; strong stock inflows signal improving risk sentiment toward Japan.

Japan’s cabinet, led by Prime Minister Sanae Takaichi, approved a ¥21.3 trillion (≈ $135.4 billion) economic stimulus package on Friday — the first major policy initiative under the new administration, which has pledged aggressive fiscal expansion.

The package includes ¥17.7 trillion in general account spending, up sharply from ¥13.9 trillion the previous year, making it the largest stimulus since the COVID-19 pandemic. It also features ¥2.7 trillion in tax cuts aimed at supporting households and boosting consumption.

While the government framed the package as essential to sustaining growth and easing cost-of-living pressures, markets remain cautious. Investors continue to express concern over Takaichi’s commitment to large-scale spending and the potential long-term fiscal strain, especially amid rising bond yields and persistent inflation pressures.

Market impact: Mildly negative for JPY; aggressive fiscal expansion raises concerns about debt sustainability and may slow BoJ normalization expectations.

Japan’s core machinery orders surged in September, rising 4.2% MoM, well above expectations of 2.2%, and sharply reversing the previous -0.9% decline. On an annual basis, orders increased by 11.6%, more than double the forecast of 5.4% and significantly above the prior year's 1.6%. The strong figures point to improving business investment and resilient corporate sentiment despite broader economic softness.

Market impact: Mildly positive for JPY; stronger capital spending data supports the outlook for industrial activity.

Japan posted a solid recovery in industrial activity in September, with capacity utilization rising 2.5% MoM after a sharp -2.3% drop previously. Industrial production also increased 2.6% MoM, beating expectations of 2.2% and reversing the prior -1.5% contraction. The data points to a meaningful rebound in factory output, supported by improved manufacturing demand and stabilization in supply conditions.

Market impact: Mildly positive for JPY; stronger industrial data partially offsets broader economic weakness.

Japan’s economy shrank in the third quarter, with GDP falling 0.4% QoQ, slightly better than expectations of -0.6%, but reversing the 0.6% expansion seen previously. On an annual basis, GDP dropped 1.8%, compared to forecasts of -2.5%, following a strong 2.3% YoY reading last quarter.

Capital expenditure rose 1.0%, beating the prior 0.8%, while private consumption inched up 0.1%, matching expectations but remaining soft. External demand, however, contracted 0.2%, reversing from a 0.2% contribution previously. The GDP price index eased to 2.8% YoY, down from 3.1%.

Overall, the data points to broad economic weakness, driven largely by sluggish exports and subdued household spending.

Market impact: Mildly negative for JPY; economic softness reinforces accommodative policy expectations.

Japan’s tertiary industry activity index jumped 5.0% in September, sharply reversing the 3.9% decline seen previously. The surge reflects a strong rebound in services activity, supported by improvements in retail, transport, and business services. The data suggests stabilizing domestic demand after recent volatility.

Market impact: Mildly positive for JPY; stronger services activity reinforces signs of recovery in Japan’s demand-driven sectors.

Japan’s Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI) surged to 41.45 in November, up sharply from 35.21 previously. The strong rebound reflects improved household confidence amid stabilizing inflation, rising wages, and expectations of firmer economic support.

Despite the jump, sentiment remains below pre-pandemic averages, highlighting lingering caution among consumers.

Market impact: Mildly positive for JPY; a strong improvement in sentiment supports domestic demand and may ease pressure on policymakers.

Japan’s latest 5-year JGB auction saw yields rise slightly to 1.245%, compared to 1.233% previously. The modest uptick suggests steady investor demand amid expectations of gradual policy normalization by the Bank of Japan, while long-term inflation expectations remain stable.

Market impact: Neutral for JPY; small yield movements reflect balanced sentiment with no significant shift in monetary policy outlook.

Japan’s Producer Price Index (PPI) increased 2.7% year-on-year in October, slightly above expectations of 2.5% but just below the previous 2.8%. On a monthly basis, producer prices rose 0.4%, following a 0.5% increase earlier. The data reflects ongoing cost pressures from imported goods and a weak yen, though overall inflation momentum remains moderate.

Market impact: Neutral to mildly positive for JPY; slightly stronger producer inflation may support expectations for gradual normalization by the Bank of Japan.

Japan recorded ¥566.3 billion in foreign bond purchases, reversing the prior week’s ¥354.5 billion outflow as investors sought stable long-term returns amid global market volatility. However, foreign investments in Japanese equities saw a sharp reversal, with ¥347.3 billion flowing out after a ¥690.1 billion inflow previously, reflecting profit-taking and caution over Japan’s weakening yen and external demand risks.

Market impact: Mixed for JPY; strong demand for bonds supports stability, but equity outflows highlight continued concern over Japan’s economic and currency outlook.

Japan’s Reuters Tankan Index rose sharply to 17 in November from 8 in the prior month, marking the strongest reading since early 2022. The improvement reflects rising optimism among manufacturers, supported by steady export demand and easing cost pressures. Non-manufacturing sectors also showed firm sentiment as domestic spending remained resilient.

Market impact: Positive for JPY; stronger business confidence suggests improving growth momentum and could support expectations for gradual policy normalization by the Bank of Japan.