–Household Spending Seen Indicating Resilient Consumption in Q4 GDP Expected to Post Rebound After Economy’s 1st Contraction in 6 Quarters in Q3
By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week.
So, there was no actual market intervention by the Ministry of Finance to sell dollars for yen last week as the MOF’s monthly data confirmed Friday. But signs of rate checks by both the Japanese and U.S. financial authorities spooked dollar bulls, at least temporarily. The dollar/yen exchange rate stood around ¥155 to the dollar, staying below a key psychological level of ¥160.
At the early stage of the election campaign for the lower house election on Feb. 8, Japanese newspapers are predicting that the conservative Liberal Democratic Party has a good change of regaining a simple majority on its own in the 465-seat House of Representatives.
The Nikkei business daily said Wednesday that its telephone and internet survey on Jan. 27-28 showed that the LDP is set to win more than a 233-seat majority while the new opposition group called Chudo Kaikaku Rengo (Centrist Reform Alliance) could lose some of its combined 167 seats that it had before the lower house was dissolved on Jan. 23. But the paper warned that the situation could change drastically toward Feb. 8, noting that more than half of the 289 single-seat constituencies appear to be hotly contested.
Just before the general election was called, Chudo was formed between the Constitutional Democratic Party of Japan, the largest opposition party whose predecessor pushed the LDP out of power in 2009 to rule the country for three years, and the Buddhist-backed Komeito that ended 26 years of partnership with the LDP in October over the slow progress in cleaning up the money politics.
The LDP has a high possibility of increasing its seats in the lower house to 233 from 198 that it had before the chamber was dissolved, the Mainichi Shimbun said Thursday, based on a joint smartphone survey with its group network TBS TV conducted on Jan. 28-29. But it also noted that 46% of those polled responded that they had not decided for whom to vote.
The Mainichi said the LDP is leading in more than half of the 289 single-seat constituencies. Of the 176 proportional representation seats, the ruling party is also projected by the newspaper to raise its seats toward 72 from 59.
Those poll results came on the heels of the latest surveys showing that Prime Minister Sanae Takaichi’s approval ratings had slipped from high levels, indicating an end to a three-month honeymoon period with voters.
The Mainichi reported that its national survey on Jan. 24-25 showed the approval rating of the Takaichi cabinet dropped to 57% from 67% seen in its previous poll on Dec. 20-21 after having stayed high in a 65% to 67% range since its inception in October. The daily said 45% opposed the prime minister calling a snap election while 25% supported her decision.
The rickety ruling coalition led by Takaichi’s LDP suffered a clear setback in the 248-member upper House of Councillors in July 2025 under her predecessor Shigeru Ishiba, failing to secure a 125-seat simple majority. It followed a crushing defeat in October 2024, when the LDP shrank to 191 seats in the more powerful House of Representatives. The LDP’s then coalition partner Komeito brought them up to 215 seats, well below the 233 majority. After Komeito left the coalition in October 2025, the LDP found a new partner, Japan Innovation Party (Ishin no Kai), which held 34 seats in the lower house before it was dissolved this month.
The data calendar for the Feb. 2 week is light. Household spending for December is expected to be flat on year or post a decline, following an unexpected 2.9% rebound in November, when a routine shuffle of household samples boosted sending on vehicles, a volatile factor.
The focus is on quarter-on-quarter change in the consumption trend index for the October-December period for an indication of private consumption in the Q4 GDP data due on Feb. 16. The index rose a real 1.1% on quarter in Q3 for the first increase in five quarters after slipping 0.1% in Q2 and 0.8% in Q1.
Economists forecast that the Japanese economy rebounded about 0.4% on quarter, or an annualized 1.6%, in the final quarter of 2025, backed by resilient consumer spending that is seen up about 0.2% for a fourth straight quarterly gain. It is also propped up by solid business investment and a pickup in housing construction. The GDP recorded its first contraction in six quarters in Q3, down 0.6%, or 2.3% annualized, as private housing investment tanked after an earlier rush spending before building codes were tightened. It was also hit by a pullback in net exports after U.S. tariffs front-running skewed exports higher in April-June.
Monday, Feb. 2
1400 JST (0500 GMT/0100 EST Monday, Feb. 2) The Bank of Japan releases the summary of opinions expressed at the Jan. 22-23 meeting. The nine-member board decided in an 8 to 1 vote to leave the target for the overnight interest at 0.75% after conducting its first rate hike in six meetings in December by raising it by 25 basis points (0.25 percentage point) to a 30-year high.
The no change in policy was expected as the bank stays the course of lifting the policy rate only gradually toward a more neutral level of at least 1%. Board member Hajime Takata, formerly with Mizuho Securities, called for a back-to-back rate increase to 1.0%, arguing that the bank’s 2% inflation target has been “largely achieved” and that there are “high upside risks” to domestic inflation as other economies are entering a recovery phase. Takata and his colleague Naoki Tamura, who came from the Sumitomo Mitsui banking group, were advocates for an earlier rate hike before December.
The board repeated its mantra that the bank will continue raising rates if growth and inflation evolve in line with its medium-term outlook, noting that real interest rates are at “significantly low levels.” In the December rate hike statement, the bank stressed that real interest rates would remain “significantly negative” and thus that accommodative monetary conditions should continue and support economic activities.
In the big picture, elevated costs of daily necessities are keeping consumers frugal, limiting growth in overall consumption. Many households continue to trim the funds sent to kids studying away from home and the gift money given at weddings and funerals. There is also a widespread move to switch more affordable mobile communications plans.
On the month, real average expenditures by households with two or more people are forecast to have slipped back 0.4% in December marking the second consecutive rise after surging 6.2% the previous month.
– Friday, Feb. 6
1030 JST (0130 GMT Friday, Feb. 6/2030 EST Thursday, Feb. 5) Bank of Japan board member Kazuyuki Masu, formerly with the Mitsubishi Corp. trading house, speaks to business leaders in Ehime City, western Japan. Masu joined the board in July and his five-year term ends on June 30, 2030.