In November, Japan’s construction orders showed a significant improvement compared to October. The year-on-year change went from a 10.1% drop to a 9.5% rise. This shift indicates a positive trend in the construction sector, suggesting a recovery from recent declines.

Implications Of Increased Construction Orders

The rise in construction orders could positively impact the overall economy. It hints at more activity and investment in the construction industry during this time. These figures are valuable for understanding the economic health of Japan’s construction sector. Higher construction activity can signal growth and progress in the country. The unexpected rebound in Japan’s construction orders—from a sharp decline to 9.5% growth—suggests renewed economic confidence. This increase points to a rise in domestic investment and activity, which should benefit industries and materials sectors. Therefore, we should consider investing in strong Japanese equities. This strong domestic data challenges the belief that the Bank of Japan will remain inactive. With core inflation around 2.4% in recent months, this economic acceleration might push policymakers to shift away from their ultra-loose policy sooner than expected. This creates a compelling argument for a stronger Japanese Yen in the near future.

Nikkei 225 Index Opportunities

For the Nikkei 225 index, which has been fluctuating within a tight range, this news could spark a significant upward movement. We recommend buying near-term call options on the index, as this data enhances the outlook for corporate earnings in the first half of 2026. A similar increase in construction orders in 2021 preceded a multi-month rally in the stock market. This turnaround reminds us of the economic momentum in 2013, when positive surprises kept driving markets higher. It indicates that, despite a weak third quarter, the Japanese economy’s underlying health is better than recent perceptions have suggested. We may be underestimating the pace of domestic recovery. As a result, implied volatility for JPY-related currency pairs is expected to rise from its current lows. We should consider buying volatility through simple option strategies to prepare for a larger-than-expected move in the USD/JPY. This approach will allow us to benefit from the increased uncertainty surrounding monetary policy expectations. Create your live VT Markets account and start trading now.

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