Japan’s industrial production rose 2.6% year on year in December. This was unchanged from the previous reading.
The data shows that annual output growth stayed at 2.6% at the end of the year. This update did not include a month-on-month figure.
With Japan’s industrial production for December 2025 stuck at 2.6% growth, the momentum seen earlier in 2025 may be weakening. The lack of improvement suggests Japanese equities could face a near-term ceiling. We should review any overly bullish positions on the Nikkei 225.
This flat industrial result, along with the January 2026 inflation print of just 1.7%, supports our view that the Bank of Japan will keep its ultra-loose policy. The gap with other central banks, especially the US Federal Reserve, is likely to remain. That backdrop still points to a weaker yen, so long USD/JPY positions remain attractive.
Given this outlook, selling out-of-the-money Nikkei 225 call options could be a sensible way to generate income if the market stays range-bound. We saw a similar plateau in mid-2024, which was followed by consolidation in stocks and a weaker currency. Current data looks more like a repeat of that setup than the start of a fresh breakout.
Implied volatility may stay low as markets absorb steady but unexciting data. That could make it cheaper to buy longer-term protective puts on export-heavy industrial stocks. January 2026 export data already showed an unexpected slowdown in shipments to China and Europe, which makes hedging more relevant.
In the coming weeks, we will look for confirmation in the Tankan business sentiment survey. For now, strategies that benefit from a sideways equity market and a weaker yen make sense. We should avoid adding to long equity positions until new growth catalysts appear.
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