The Bank of Japan is likely to maintain its interest rate in the upcoming meeting.

The Japanese yen remains stable at around 152.3 yen per dollar after weakening for three consecutive days. This comes amidst uncertainty regarding when the Bank of Japan (BoJ) will raise interest rates. Investor expectations of a rate hike in December have declined, even though some BoJ officials have advocated for a hike this month, citing concerns that excessive yen depreciation could increase import costs and potentially lead to higher inflation. Investors are now awaiting significant economic data from Japan to gain deeper insights into the country's economic outlook. Meanwhile, the yen continues to face pressure from the strengthening U.S. dollar, despite recent U.S. inflation data heightening expectations that the Federal Reserve might cut interest rates further next week.

Japan's manufacturing confidence plummeted sharply in December. The Reuters Tankan index fell to -1 from +5 in November, marking the first negative reading in 10 months. This decline reflects growing concerns over U.S. trade policies and a slowing Chinese economy, despite some government support. Business sentiment weakened across multiple sectors, particularly among manufacturers of electronic equipment, machinery, steel, and non-ferrous metals. Many businesses remain apprehensive about potential impacts from new tariffs proposed by Trump, fearing they could disrupt global trade. Weak sales in China have also significantly contributed to the decline in confidence.

Orders for Japanese machinery rose 3.0% year-on-year to ¥119.336 billion in November, a slowdown from 9.3% growth in the previous month. This expansion was driven by a 5% year-on-year surge in domestic demand for manufacturing machinery, reaching ¥34.326 billion. Meanwhile, overseas orders continued to grow, increasing by 2.2% to over ¥85.010 billion. However, on a month-to-month basis, machinery orders declined by 2.6%.

Japan's GDP grew 0.3% quarter-on-quarter in Q3, exceeding both the BoJ’s estimates and market expectations of 0.2%. This marks two consecutive quarters of growth. Business investment contracted less than anticipated, demonstrating the resilience of domestic businesses. However, Japan’s trade balance remained weaker than expected, with exports declining more significantly than imports. External demand continues to be a critical factor for GDP, contracting for three consecutive quarters, even as private consumption shows signs of improved adaptability.

Japan's leading economic index, which measures economic trends over the coming months based on data such as job offers and consumer confidence, declined to 108.6 in October from 108.9 in September, falling short of market expectations of 108.9. This drop was attributed to a rise in unemployment to 2.5% in October, up from an eight-month low in September. Additionally, the services sector contracted for the first time since June, while factory activity shrank at the fastest pace in seven months. These factors have led to a sharp decline in industrial confidence.