Japan’s industrial production drops to -1.6% year-on-year in August, down from -1.3%

    by VT Markets
    /
    Oct 15, 2025
    Japan’s industrial production dropped in August, showing a year-on-year decline of -1.6%. This comes after a previous decrease of -1.3%. The August 2025 data confirms that Japan’s economy is slowing down. This marks the second monthly decline, indicating broader issues in manufacturing. We should prepare for further economic softness in the weeks ahead.

    Buying Put Options

    Lower production affects corporate profits. Because of this, we’re looking to buy put options on the Nikkei 225 index. Our decision is backed by the latest Tankan survey, which shows a decrease in business confidence among large manufacturers. These options give us a straightforward way to protect against potential losses in the stock market. With ongoing economic weakness, it’s unlikely that the Bank of Japan will tighten its monetary policy soon. The divergence from the US Federal Reserve, which has kept rates steady through 2025, could put additional downward pressure on the Yen. We see potential in going long on USD/JPY futures contracts. Furthermore, the latest export data from September 2025 indicates a significant slowdown in shipments to major markets like China and Europe. This external factor helps explain the drop in local production and strengthens the negative outlook for Japanese stocks and the Yen.

    Historical Parallels

    A similar situation occurred in the early 2010s when weak domestic data kept the Bank of Japan very accommodating for years. During that time, the Yen was significantly weaker. This history suggests that the current slowdown may lead to a similar trend. Create your live VT Markets account and start trading now.

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