Economic Background - Japan's economy is experiencing a mild recovery under persistent re-inflation, contrasting with the deflationary stagnation faced by former Prime Minister Abe Shinzo[8] - The Consumer Price Index (CPI) growth peaked at 4% in 2022, driven primarily by high food and energy prices, with inflation remaining above the Bank of Japan's 2% target[9] - Domestic demand has been the main driver of GDP growth, contributing over 1 percentage point to actual GDP since Q3 2024, while external demand has weakened due to tariff impacts[13][19] Policy Outlook - The new Prime Minister, Takashi Sanae, aims for an "expansionary but responsible fiscal policy," with expectations of a rising fiscal deficit ratio in 2026, constrained by debt risks[30] - Monetary policy is expected to remain accommodative, with the Bank of Japan likely to raise interest rates by 30-50 basis points in 2026, despite a cautious stance[35] - Strategic investments in 17 key industries, including AI and semiconductors, are planned to stimulate growth over the next five years[30] Market Impact - The "Takaichi Trade" has emerged, characterized by rising Japanese stocks and weakening yen and bonds, with expectations of a bullish stock market and bearish bond and currency outlook for 2026[40] - The Nikkei 225 index has seen a 26% increase from January to November 2025, driven largely by technology stocks, which contributed approximately 70% of the gains[49] - Japanese government bonds are expected to face upward yield pressure due to ongoing fiscal expansion and reduced demand from domestic and foreign investors[40] Risks and Challenges - The government faces significant political pressure, limiting the effectiveness of policy implementation, as the ruling coalition lacks a majority in the Diet[39] - External shocks, particularly from U.S. tariff policies, are likely to continue impacting Japan's export sectors, especially in automotive and electronics[22][25] - Input inflation remains a challenge, potentially constraining consumer spending and complicating wage growth dynamics[20]

Macroeconomic Overview - The current economic backdrop for Japan under Prime Minister Kishi is characterized by moderate recovery amidst ongoing re-inflation, contrasting with the deflationary stagnation faced by former Prime Minister Abe [3] - Kishi's economic strategy emphasizes demand-side management to combat external inflation while also pursuing structural supply-side reforms to stimulate new growth sectors [3] Fiscal Policy - Kishi plans to implement an "expansionary but responsible fiscal policy," with expectations of an increase in Japan's fiscal deficit ratio by 2026, although the overall expansion may be limited due to debt risks [3] Monetary Policy - Despite a dovish stance, the Bank of Japan is expected to continue raising interest rates in 2026, with a potential increase of 30 to 50 basis points, while also slowing the pace of balance sheet reduction [3] Industrial Policy - Kishi aims to enhance strategic investments in 17 key industries over the next five years, focusing on sectors such as AI, semiconductors, shipbuilding, quantum technology, biotechnology, aerospace, and cybersecurity [3] Market Impact - The "Kishi trade" observed in October indicates a strengthening of Japanese stocks, while the yen and Japanese bonds weaken, with expectations of a bullish stock market and continued upward pressure on bond yields [4] - The yen is projected to remain under pressure in the short term, with a potential for slight appreciation if U.S. dollar credit declines [4] Automotive Industry - The wholesale prices of passenger vehicles have stabilized in October, with an average discount rate of 18.5%, reflecting a shift from price competition to refined operations in the domestic market [7] - Traditional fuel vehicles maintain a high average discount rate of 26.3%, while new energy vehicles show a more stable discount rate of 12.8%, indicating a dual advantage in cost control and market demand for new energy products [7][8] Investment Fund Trends - As of October 2025, the total net asset value of public funds in China is 36.02 trillion yuan, with a net outflow observed in stock and bond funds, while money market funds saw an increase [12] - Individual investors' risk appetite has been affected by market volatility, leading to a decline in shares of ordinary stock and mixed funds, while QDII and FOF funds have gained traction as safe-haven investments [13] - Mixed FOF products have performed well, with a 63.10% increase in new issuance, as they provide a balance of risk and return for retail investors [14]

Group 1 - The core concern in the market as 2025 ends is whether the "celebration" of global risk assets can continue into 2026 [1] - The Federal Reserve announced a 25 basis point rate cut and will end its "balance sheet reduction" process on December 1, which has contributed to the rise of the US stock market, reaching a historical high of 6920 points, up over 40% since April [1] - The A-share market also experienced a bull market in 2025, with the Shanghai Composite Index surpassing 4000 points, driven by strong performances in technology and innovative pharmaceutical sectors, with some tech stocks rising over 500% this year [3] Group 2 - Gold has seen rapid price increases, breaking through the $3000 and $4000 per ounce marks, but recently experienced a significant 10% pullback, raising questions about whether this is a temporary technical correction or a shift in its long-term bullish trend [3] - Japan's stock market has surged, with the Nikkei 225 index rising over 70% since April, influenced by political changes and monetary easing policies introduced by the new Prime Minister, who announced a 14 trillion yen stimulus plan [4][7] - The upcoming APEC summit in South Korea is expected to impact global economic and financial market trends, with significant events in the political and economic landscape anticipated in the next two months [8]