Japan’s core machine orders for July 2025 increased by 4.9% compared to last year, but this fell short of the expected 5.4% growth. This data is an early sign of business investment trends for the next six to nine months. However, month-on-month orders dropped by 4.6%, which is worse than the forecasted decline of 1.7%, following a rise of 3.0% in the previous month. While the year-on-year growth looks better, the monthly decline raises concerns.

Upcoming Bank Of Japan Statement

Tomorrow, the Bank of Japan will issue a statement, and many believe interest rates will remain the same. The meeting that began today is expected to maintain current rates. The significant 4.6% drop in July 2025 machinery orders indicates a troubling slowdown in business investment. This figure is worse than the anticipated 1.7% decline and suggests companies are losing confidence. It hints that the Japanese economy may struggle as we head into 2026. Given this weak data, the Bank of Japan will likely keep its monetary policy loose during tomorrow’s meeting. The national core CPI for August 2025 stands at 1.8%, still below the 2% target, giving the central bank little reason to raise rates. We can expect officials to highlight the risks facing the economy.

Currency And Stock Market Implications

For currency traders, this news supports the idea of a weaker yen. A slowing economy combined with a central bank that favors lower rates usually leads to currency depreciation. Traders may start buying USD/JPY call options, betting that the pair will rise above the resistance it struggled with in early August. Despite the disappointing domestic data, this situation can boost Japanese stocks. A weaker yen benefits the earnings of major Japanese exporters, which significantly influence the Nikkei 225 index. This trend was evident during 2013-2015, when a weaker yen consistently lifted the Nikkei, regardless of mixed domestic signals. This unexpected data will also keep Japanese Government Bond yields low, as traders anticipate prolonged low interest rates. The volatility of this data may create short-term market uncertainty, making it appealing to buy options that profit from an uptick in Nikkei volatility in the coming days. Create your live VT Markets account and start trading now.

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