Japan's economy shrinks 0.4% quarter-on-quarter in Q3, surpassing expectations
Japan's GDP Contraction: Japan's GDP shrank by 0.4% in Q3 2025, marking its first quarterly drop since Q1 2024, primarily driven by weak private consumption due to rising food prices.
Annualized Economic Performance: On an annualized basis, the economy contracted by 1.8%, which was better than the expected 2.5% decline, indicating a less severe downturn than anticipated.
Industrial Output Growth: Industrial output rose by 2.6% in September 2025, the fastest growth since March 2024, with a 3.8% annual increase reversing a previous decline.
Market Reactions and Tensions: Despite positive industrial data, the Nikkei 225 Index and the Topix Index fell, influenced by heightened tensions with China and the impact of Prime Minister Takaichi's comments on Taiwan.
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Takaichi's Victory in Japan: Facing the Challenges Ahead.
Election Victory: Japanese Prime Minister Sanae Takaichi led her Liberal Democratic Party to its largest election victory, securing a two-thirds majority in the Lower House of parliament.
Constitutional Amendments: This majority enables the party to override Upper House vetoes and pursue amendments to Japan's pacifist constitution.
Takaichi of Japan May Trigger a Reaction from Bond Vigilantes
- Political Influence: The presence of Liz Truss is being felt in Japan, highlighting the impact of female leadership in global politics.
- Emerging Leadership: Sanae Takaichi, another female politician, is noted for bringing this influence to Japan.
Japanese Citizens Support New Prime Minister, But Markets Disagree.
Voter Concerns: U.S. voters are increasingly frustrated with issues related to affordability, reflecting broader economic anxieties.
Global Context: The sentiment regarding affordability is not limited to the U.S.; it resonates with voters in other countries as well.
Countering the Bubble: A Protective Fund Portfolio for Current Conditions
Types of Market Crashes: Stock market bubbles can lead to two distinct types of crashes when they burst: sector-specific crashes and systemic crashes.
Sector-Specific Crashes: An example of a sector-specific crash is the dot-com collapse that occurred between 2000 and 2002, which primarily affected technology stocks.
Systemic Crashes: In contrast, systemic crashes impact the entire market, as seen during the financial crisis of 2008-09, where widespread declines occurred across various sectors.
Uniqueness of Bubbles: Each stock market bubble is unique, much like snowflakes, indicating that the circumstances and outcomes of each bubble's burst can vary significantly.
International Deals to Watch in 2026: Alibaba, Kering, and 5 Others
International Stock Performance: In 2025, international stocks, particularly in export-driven countries like Korea and China, experienced strong gains, surpassing the performance of the S&P 500 despite high U.S. tariffs.
Future Market Outlook: There is potential for further rallies in non-U.S. markets in 2026, driven by decreasing interest rates and increasing corporate earnings.
Asia Markets Show Little Movement as Trading Volumes Remain Low and BoJ Under Review
Asia Stock Markets: Asian stock markets remained mostly flat amid low trading volumes and holiday liquidity, with Japan's Nikkei slightly declining while the yen strengthened due to potential government intervention.
Bank of Japan Rate Hike: The Bank of Japan raised its key short-term interest rate by 25 basis points to 0.75%, marking its second increase of the year and indicating a shift from a loose monetary policy.
Gold Prices Surge: Gold prices reached a record high of over $4,500 per ounce, driven by expectations of further easing from the Federal Reserve and increasing geopolitical tensions.
Mixed U.S. Market Performance: U.S. stock indexes closed mixed, with technology and energy stocks performing well, while futures showed little change following a record high for the S&P 500.
Takaichi's Victory in Japan: Facing the Challenges Ahead.
Election Victory: Japanese Prime Minister Sanae Takaichi led her Liberal Democratic Party to its largest election victory, securing a two-thirds majority in the Lower House of parliament.
Constitutional Amendments: This majority enables the party to override Upper House vetoes and pursue amendments to Japan's pacifist constitution.
Takaichi of Japan May Trigger a Reaction from Bond Vigilantes
- Political Influence: The presence of Liz Truss is being felt in Japan, highlighting the impact of female leadership in global politics.
- Emerging Leadership: Sanae Takaichi, another female politician, is noted for bringing this influence to Japan.
Japanese Citizens Support New Prime Minister, But Markets Disagree.
Voter Concerns: U.S. voters are increasingly frustrated with issues related to affordability, reflecting broader economic anxieties.
Global Context: The sentiment regarding affordability is not limited to the U.S.; it resonates with voters in other countries as well.
Countering the Bubble: A Protective Fund Portfolio for Current Conditions
Types of Market Crashes: Stock market bubbles can lead to two distinct types of crashes when they burst: sector-specific crashes and systemic crashes.
Sector-Specific Crashes: An example of a sector-specific crash is the dot-com collapse that occurred between 2000 and 2002, which primarily affected technology stocks.
Systemic Crashes: In contrast, systemic crashes impact the entire market, as seen during the financial crisis of 2008-09, where widespread declines occurred across various sectors.
Uniqueness of Bubbles: Each stock market bubble is unique, much like snowflakes, indicating that the circumstances and outcomes of each bubble's burst can vary significantly.
International Deals to Watch in 2026: Alibaba, Kering, and 5 Others
International Stock Performance: In 2025, international stocks, particularly in export-driven countries like Korea and China, experienced strong gains, surpassing the performance of the S&P 500 despite high U.S. tariffs.
Future Market Outlook: There is potential for further rallies in non-U.S. markets in 2026, driven by decreasing interest rates and increasing corporate earnings.
Asia Markets Show Little Movement as Trading Volumes Remain Low and BoJ Under Review
Asia Stock Markets: Asian stock markets remained mostly flat amid low trading volumes and holiday liquidity, with Japan's Nikkei slightly declining while the yen strengthened due to potential government intervention.
Bank of Japan Rate Hike: The Bank of Japan raised its key short-term interest rate by 25 basis points to 0.75%, marking its second increase of the year and indicating a shift from a loose monetary policy.
Gold Prices Surge: Gold prices reached a record high of over $4,500 per ounce, driven by expectations of further easing from the Federal Reserve and increasing geopolitical tensions.
Mixed U.S. Market Performance: U.S. stock indexes closed mixed, with technology and energy stocks performing well, while futures showed little change following a record high for the S&P 500.
