Japan’s Tertiary Industry Index rose by 0.9% in October, an increase from 0.3% the month before. This growth suggests a recovery in the service sector, which is a positive sign for the economy. This data comes at a time when Japan’s economic performance is under close examination, especially in regard to market expectations and central bank decisions. We will provide further updates as more information becomes available.

Economic Resilience Observed

As of December 15, 2025, the unexpected 0.9% rise in Japan’s October Tertiary Industry Index is notable. It confirms a trend of economic resilience that we have been tracking throughout the second half of the year. Strength in the service sector supports the idea that the Japanese economy can handle stricter monetary policies. This good news arrives alongside core inflation, which remains stubbornly high, currently at 2.4% for November 2025, above the Bank of Japan’s target of 2%. With resilient service sector activity and ongoing inflation, there’s a greater chance of an interest rate hike by the Bank of Japan in the first quarter of 2026. We expect the central bank’s guidance to become more hawkish in upcoming meetings. For currency traders, this outlook may lead to a stronger yen in the coming weeks. The USD/JPY is pulling back from earlier highs above 155 this quarter, and this data suggests further declines. Traders might consider buying JPY call options or selling out-of-the-money USD call options to prepare for a potential shift toward the 148-150 range.

Impact on Japanese Equities

This forecast negatively affects Japanese equities. A stronger yen generally presents challenges for the export-driven Nikkei 225, which has already experienced profit-taking after reaching record highs in mid-2025. We recommend using derivatives to protect long equity positions, such as buying Nikkei put options for insurance against a downturn caused by currency fluctuations. We should recall the Bank of Japan’s slow, cautious shift away from its ultra-loose policy that began in 2024. While the bank is unlikely to make hasty decisions, the accumulating data suggests it may need to take action. The key focus will be on subtle changes in the Bank of Japan’s language, as that will likely trigger the next major move. Create your live VT Markets account and start trading now.

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