<div id="readability-page-1"><div>--PM Takaichi Keeps High Approval Ratings but Faces Challenges as Beijing Reacts to Her Taiwan Remarks(MaceNews) – Here are the key Japanese economic events for the coming two weeks. Japanese markets are closed for yearend and New Year’s holidays from Wednesday, Dec. 31 until Friday, Jan. 2. Trading will resume on Monday, Jan. 5. Foreign exchange rates tend to fluctuate widely in choppy trading conditions.The year 2025 is set to close with about a 20% gain in the Nikkei 225 stock index, playing catchup with U.S. markets that have been partly boosted by the AI boom. On the downside, Japanese households and businesses have been nervously watching the poor performance of their currency as it keeps import costs high. The dollar/yen exchange rate kicked off the year at Y156.49, the monthly average. After slipping to Y144.50 in June, the U.S. unit picked up to Y155.12 by the end of November as investors sought higher-yielding currencies.Investors also saw the yield on the 10-year Japanese government bonds climb to a 26-year high of 2.1% on the prospect of continued gradual rate hikes by the Bank of Japan. The bank has been reducing excess stimulus provided under the previous governor, Haruhiko Kuroda, who tried in vain to change the deeply rooted deflationary mindset among households and businesses during his two five-year terms that ended in April 2023.The target for the overnight interest rate charged among lenders stands at 0.75% after four rate hikes under Governor Kazuo Ueda who shifted gears toward gradual normalization of the bank’s monetary policy in March 2024. BOJ officials have been saying that real interest rates remain “significantly negative,” which should support economic activity.The BOJ’s current policy rate is well below the target range for the U.S. federal funds rate of 3.5% to 3.75% and the European Central Bank’s policy rate of 2.15%. These interest rate differentials are keeping the yen weak as the BOJ’s rate hikes are only gradual while other major central banks are either close to their neutral rates or cautious about lowering rates further.On the political front, Prime Minster Sanae Takaichi is finishing off her two-month honeymoon period with high voter approval ratings that range from 67% to 75% in the latest polls by major news media, although some of those figures drifted lower since she took office on Oct. 21. Voters appear to be giving the thumps-up to her swift top-down decisions to abolish a “temporary” levy on gasoline that had been in place for decades and further raise the taxable income threshold to Y1.78 million from Y1.60 million, which was already increased in the current fiscal year from Y1.03 million.That measure to support low-income households is aimed at discouraging second income earning spouses from trimming their work hours to avoid losing family deductions. It was first proposed about a year ago by Yuichiro Tamaki, the head of the opposition Democratic Party for the People. Takaichi also quickly agreed to a proposal by Tamaki to provide higher basic exemptions to people making Y6.65 million or less to support middle-income earners.Takaichi’s decision-making style is in stark contrast to her recent predecessors, each of whom stayed in power for about a year to three years at most. They spent much time listening to other politicians and advisors but failed to take action. Some have compared her to the lone wolf maverick Junichiro Koizumi (in office from April 2001 until September 2006), who implemented previously unpopular structural reforms under the slogan “no pain, no gain” and led the Liberal Democratic Party to successive election wins by declaring that he would “split the party.” He pushed partial privatization of postal services, freeing up huge national savings in the postal banking system that had become a source of discretionary financing of government spending.Takaichi’s processor Shigeru Ishiba (October 2024 to October 2025) stepped down to take the blame for leading the ruling coalition to crushing defeats in general elections. Fumio Kishida (October 2021 to October 2024) promised to bring in “new capitalism” for a more equal society but left at the end of a three-year term amid elevated inflation and voter frustration over the money scandals involving many ruling party lawmakers while the government sought higher taxes to boost miliary spending. Yoshihide Suga (September 2020 to October 2021) lost voter support after threatening to cancel broadcast licenses of the news media that were critical of the government. He failed to achieve much beyond forcing mobile carriers to slash their prices for data and voice communications.Takaichi’s popularity may be partly due to her successful climb to the top of the ruling party, crashing through the glass ceiling for women. At the same time, liberal voters are uneasy about her right-wing view of Japan’s wartime aggression. Takaischi is also opposed to same-sex marriage and allowing women to keep their maiden names when they register marriage.There is also some concern about Takaichi’s working style, which seems contrary to a national trend toward better work-life balance. The 64-year-old leader brags about sleeping for only about two to four hours a night, which medical doctors say can undermine her decision-making ability in a crisis. When Takaichi won the party leadership in October, she urged her colleagues to “work hard” to regain voter confidence and rebuild the party, saying she would “ditch work-life balance.”Critics also point to Takaichi’s recent diplomatic blunder. In parliamentary debate in November, she was asked how Japan would respond if China imposed a maritime blockade on Taiwan. &#34;If it involves the use of warships and the exercise of force, it would, by any measure, constitute a survival-threatening situation (for Japan),&#34; she said, referring to the condition under which Japan’s self-defense forces could support the U.S. military without violating the constitution.Her remarks triggered a sharp reaction from Beijing, which then urged Chinese to boycott visits to Japan. Political analysts fear the controversy gives China more incentive to take military action on Taiwan.It remains to be seen how the Takaichi administration will fare in the coming months as it seeks to cushion the impact of the weak yen on the cost of imports and elevated inflation. The government has also proposed a record Y122.3 trillion budget for fiscal 2026 that starts in April at the same time as Takaichi has vowed to shun “irresponsible” debt issuance and tax cuts to prop up the economy. Fiscal hawks now wonder how she will finance the new spending.- Monday, Dec. 290850 JST (2350 GMT/1850 EST Sunday, Dec. 28) The Bank of Japan releases the summary of opinions from its Dec. 18-19 meeting at which the nine-member board, as widely expected, decided unanimously to raise the target for the overnight interest rate by 25 basis points (0.25 percentage point) to a 30-year high of 0.75%, pointing to easing uncertainties over U.S. trade rows and growing expectations that firms will continue raising wages into fiscal 2026 staring in April.BOJ Governor Kazuo Ueda told a news conference on Dec. 19 that the board would discuss the need to raise rates further, taking &#34;one meeting at a time&#34; and that its policy decisions would be “data- and information-dependent.&#34; After the latest action, the short-term rate at 0.75% is &#34;still slightly below the lower end of the estimated neutral rate,&#34; he said, referring to the evasive measure often described as a moving target that is neither too stimulative nor too restrictive to economic activity.- Tuesday, Dec. 30- Japanese stock exchanges wrap up trading for 2025.- Monday, Jan. 5- Japanese stock exchanges begin trading for 2026.Thursday, Jan. 8- Bank of Japan branch managers gather at the bank’s Tokyo head office for their quarterly meeting.1400 JST (0500 GMT/0000 EST) The BOJ releases the quarterly regional economic report. In the last report issued in October, all nine Japanese regions reported that their respective economies had been recovering moderately, picking up, or picking up moderately with some soft spots.The report comes as anticlimax following the Dec. 15 release a quick survey by the bank’s head office and branches that showed a majority of companies plan to maintain the existing relatively high pace of wage hikes into fiscal 2026 amid widespread labor shortages. Combined with improving business confidence found in the December quarter Tankan survey that was also issued on Dec. 15, this provided sufficient anecdotal evidence for the bank to justify an interest rate hike at its policy-setting meeting that week.- Friday, Jan. 90830 JST (2330 GMT/1830 EST Thursday, Jan. 8) The Ministry of Internal Affairs and Communications releases October average household spending.Mace News median forecasts: -1.4% y/y (range: -2.5% to -0.6%) vs. Oct -3.0%; +1.4% m/m (range: +0.4% to +3.3%) vs. Oct -3.5%Japan’s real household spending is forecast to post a second straight year-on-year dip in November, down 1.4%, after slumping 3.0% in October, which was its first decline in six months triggered by a plunge in automobile purchases after a recent recovery. This indicates that sluggish private consumption will limit an expected slight rebound in the Q4 GDP after the economy suffered its first contraction in six quarters in July-September.Consumers have been shedding expenditures on food and beverages amid sticky inflation and falling real wage. There is also a continuous move to switch to lower mobile communications plans.Japanese retail sales rose 1.0% on year in November for a third straight increase after rising 1.7% in October, led by sustained strong demand for drugs and cosmetics, solid vehicle sales and a sharp gain in appliances, possibly heat pumps and other seasonal goods. The slower pace of increase reflects a third straight drop in clothing and a slower rise in combined sales at department stores and supermarkets.On the month, real average expenditures by households with two or more people are expected to rise 1.4% in November, marking its first increase in three months after falling 3.5% the previous month.- Friday, Jan. 91400 JST (0500 GMT/0000 EST) The Bank of Japan releases the November supply-side real consumption activity index.The index was unchanged on the month in October after rising a seasonally adjusted 0.6% in September, edging up 0.2% in August and slipping 0.5% in July. The index gained 0.5% on quarter in October after rising 0.2% in July-September. Figures exclude inbound tourism consumption but include outbound tourism spending.</div></div>

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Japanese markets will close for yearend holidays from Dec. 31 to Jan. 2, resuming on Jan. 5. The Nikkei 225 is set to end 2025 with a 20% gain, while the yen remains weak. The 10-year Japanese government bond yield hit a 26-year high of 2.1% due to BOJ's gradual rate hikes. PM Takaichi maintains high approval ratings despite challenges, including reactions to her Taiwan remarks.

Japan Week Ahead: Stocks Ending 2025 on High Note, Bond Yields Up on BOJ Rate Hike Outlook but Yen Remains Depressed