Economic Overview - The uncertainty surrounding the UK budget continued to weigh on economic growth in October, with the services sector contracting by 0.3% month-on-month, a trend that may persist into November [1] - Overall, the GDP shrank by 0.1% for the second consecutive month in October, raising concerns about a potential quarterly contraction for the first time since 2023 [1] Sector Performance - Despite the recovery from the cyberattack affecting Jaguar Land Rover, automotive production has not rebounded as expected [1] - The construction sector experienced its fastest contraction since April 2024, indicating significant challenges ahead [1] Future Outlook - The combination of uncertainty, weak hiring, and concerns over rising unemployment may lead to subdued spending and investment as the year comes to a close [1] - The path into the new year is expected to be challenging, with risks of further economic decline [1]

Group 1 - The Japanese economy contracted more than initially reported for the July to September quarter, with a revised annual GDP decline of 2.3%, exceeding economists' expectations of a 2.0% drop and the initial estimate of 1.8% [1] - On a quarterly basis, GDP fell by 0.6%, compared to economists' forecast of a 0.5% decline and an initial estimate of a 0.4% decrease [1] - Private consumption, which accounts for over half of Japan's economy, saw a slight month-on-month increase of 0.2% in October, higher than the initial estimate of 0.1% [1] Group 2 - Capital expenditure, an indicator of private demand, decreased by 0.2% quarter-on-quarter in the third quarter, contrasting with the initial estimate of a 1.0% increase [1]

Core Viewpoint - Japan's economy has experienced a downturn after five consecutive quarters of growth, with a 1.8% year-on-year decline in GDP for Q3 2025, marking the first negative growth in six quarters [1][10]. Group 1: Economic Performance - The GDP decreased by 0.4% on a quarter-on-quarter basis, slightly better than the market expectation of a 0.6% decline, indicating a loss of growth momentum for the world's fourth-largest economy [1]. - The decline in Japan's economy is attributed to simultaneous downturns in exports, housing investment, and private consumption, which are considered the three main drivers of economic growth [3]. Group 2: Export and Trade Impact - Japan's goods and services exports fell by 1.2% quarter-on-quarter, significantly impacted by U.S. tariff increases, particularly affecting the automotive sector, which saw a substantial drop in export volumes [4][6]. - The contribution of external demand to GDP growth was negative by 0.2 percentage points due to the decline in exports, which account for 20% of Japan's total exports [7]. Group 3: Domestic Consumption and Investment - Private consumption, which constitutes over half of Japan's economy, showed minimal growth of only 0.1% quarter-on-quarter, a slowdown from 0.4% in the previous quarter [5]. - Housing investment experienced a dramatic decline of 9.4% quarter-on-quarter, linked to stricter energy efficiency regulations introduced in April [4]. Group 4: Policy Response and Future Outlook - In response to economic contraction, the Japanese government is accelerating fiscal measures, with an economic stimulus plan exceeding 17 trillion yen (approximately $109.9 billion) aimed at alleviating the impact of rising living costs and boosting investment in growth sectors like AI and semiconductors [9]. - Economists generally view the current economic data as a temporary setback rather than the beginning of a recession, with expectations of gradual recovery over the next one to two years despite underlying issues such as stagnant real wages and rising food costs [11].

Core Insights - Japan's economy showed significant contraction in the third quarter, breaking a six-quarter growth trend, raising concerns for future policy decisions [2][3] - External demand weakened due to rising trade pressures and tariffs imposed by the US on certain Asian goods, negatively impacting Japan's export sector [2] - Domestic investment also weakened, particularly in residential investment, due to regulatory adjustments causing uncertainty in the construction industry [2] - Consumer sentiment remained cautious amid high prices and an unclear economic outlook, limiting the potential for economic rebound [2] Economic Performance - The third quarter saw a notable slowdown in actual economic activity, primarily driven by external factors [2] - Weak overseas demand and increased trade pressures were significant contributors to the overall growth decline [2] - The contraction in residential investment was particularly pronounced, reflecting structural adjustments within the industry [2] Central Bank Implications - The latest economic data complicates the Bank of Japan's decision-making regarding interest rate adjustments, which were previously anticipated by the market [3] - The unexpected economic contraction may lead policymakers to reassess the pace of tightening and potentially delay further rate hikes [3] - The interplay of external uncertainties and internal adjustments presents challenges for future policy directions [3]

Group 1 - The USD/JPY exchange rate is currently at 154.7300, with a slight increase of 0.12%, reflecting limited reaction to Japan's economic contraction in Q3, which was less severe than expected [1] - Japan's GDP contracted by 0.4% quarter-on-quarter and 1.8% year-on-year, indicating insufficient economic momentum and leading to lowered expectations for the Bank of Japan's interest rate hikes [1] - The Japanese government is promoting a new round of fiscal stimulus to alleviate rising living costs, suggesting continued expansionary fiscal policy and a likely maintenance of loose monetary policy, which may hinder the yen's ability to gain interest rate advantages [1] Group 2 - From a technical perspective, the USD/JPY maintains a bullish structure in the short term, with clear resistance levels identified [2] - A strong rebound occurred from the 153.60 level, breaking through the 154.45-154.50 resistance zone, indicating potential for further upward movement if the 155.00 psychological level is breached [2] - The support level at 154.00 remains intact; however, a drop below 153.60 could shift the short-term bias to bearish, targeting the 152.10 range [2]

Core Viewpoint - Argentina is facing a severe currency crisis, prompting the central bank to intervene in the foreign exchange market by selling a total of $1.11 billion to support the peso, which has depreciated significantly against the dollar [1][3][4]. Group 1: Currency Intervention - The Argentine central bank sold $678 million on Friday, following sales of $379 million on Thursday and $53 million on Wednesday, marking a total intervention of $1.11 billion over three days [3]. - The peso has depreciated nearly 11% against the dollar in the past month and has seen a year-to-date decline of 30.1% [3]. Group 2: Government Response - Economy Minister Luis Caputo vowed to use "the last dollar" to defend the exchange rate and plans to guarantee payments on international bonds maturing in January and July 2026 [4]. - The government has implemented new foreign exchange controls to stabilize the currency, including stricter regulations on banks and prohibiting certain financial transactions [9][10]. Group 3: Political Context - The peso's collapse is attributed to a political crisis, following unexpected electoral losses for President Javier Milei's party, which undermined investor confidence in his ability to maintain a free-market agenda [8][9]. - The upcoming midterm elections on October 26 are critical, as they will reflect public sentiment towards Milei's economic policies and could influence the stability of his administration [9]. Group 4: Economic Implications - Analysts warn that the massive sale of dollars to support the peso could lead to a significant contraction in economic activity, potentially resulting in credit tightening and economic recession [4]. - The International Monetary Fund's (IMF) $20 billion loan has provided temporary relief but has not led to a sustainable accumulation of reserves, leaving Argentina with limited foreign exchange resources [4].

Core Insights - The Canadian economy is expected to show no growth in Q2, with a significant risk of contraction [1] - The Bank of Canada is anticipated to lower interest rates at least two more times due to ongoing economic challenges [1] Economic Performance - April's GDP data indicates a decline of 0.1%, with similar contractions expected in May [1] - The quarterly annualized growth rate for the remainder of 2025 is projected to remain below 1% [1] Monetary Policy - The economic outlook suggests that the Bank of Canada will respond to the weak growth by implementing further interest rate cuts [1]

Core Insights - The World Bank forecasts that Myanmar's economy will contract by 2.5% in the fiscal year 2025/26, primarily due to the impact of earthquakes [1] Economic Outlook - The contraction of 2.5% indicates a significant downturn in economic activity for Myanmar, highlighting vulnerabilities in the region [1]