By Max Sato
(MaceNews) – Here are the key Japanese events for the coming week.
Prime Minister Sanae Takaichi is scheduled to hold a news conference on Monday evening (in the early hours of Monday, Jan. 19 in the Eastern time zone) to officially announce that she will call a snap election at the start of the 150-day ordinary Diet session on Jan. 23 by dissolving the House of Representatives.
Voters are expected to go to the polls on Sunday, Feb. 8, which means both the incumbents and challengers have a limited campaign period. That may work to help Takaichi’s Liberal Democratic Party. Recent polls indicate that the leader of the embattled conservative party has maintained high approval ratings despite the public outcry over the LDP’s reluctance to ban business donations to political parties, the main cause of funding scandals at the party.
However, the LDP faces a serious threat from the last-minute pre-election merger 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. Komeito leaders appeared to tire of the LDP using their party as a vote-generating machine in exchange for nothing much in recent years.
The LDP alone has only 199 seats in the House of Representatives, well short of a simple majority of 233. Japan Innovation Party (Ishin no Kai), a small opposition party with 34 seats in the chamber, agreed to form a coalition late last month on condition that the LDP would work with it to reduce the number of lawmakers. That has given the Takaichi administration temporary relief but Ishin no Kai, which itself has seen its popularity decline in recent elections, remains cautious, opting out of sending any of its members to the cabinet.
The CDP holds 148 seats in the lower chamber of parliament and the Komeito 24. Put together, the merged party has 172 seats, edging closer in size to the shaky coalition between the LDP and its new partner.
The Mainichi Shimbun newspaper, using the 2024 lower house election results, predicted last week that if the number of votes for the LDP-led coalition that are believed to have been earned by the Komeito’s support were to fall by a certain amount, outcomes could reverse in as many as 42 single-seat constituencies currently held by the LDP.
During the 26 years of LDP-Komeito partnership, Komeito tended to endorse candidates fielded by the LDP in single-seat districts while LDP candidates would call for votes for Komeito in proportional representation elections. But now that the new opposition force is born, the LDP will probably lose Komeito votes in single-seat districts.
Based on the results of the 2024 House of Representatives election, the Mainichi simulated the impact on incumbent LDP candidates assuming Komeito’s “base vote” in each single-seat constituency was 10,000 votes. If the LDP candidate lost 10,000 base votes, the vote counts would reverse between the LDP and other candidates in 27 ridings nationwide. The simulation results showed the Constitutional Democratic Party of Japan winning 22 seats, the Japan Innovation Party winning 3 seats and two independents winning seats in single-seat constituencies.
The formation of the new opposition party called Chudo Kaikaku Rengo (Centrist Reform Alliance) could also prompt Komeito votes to shift toward candidates who were previously affiliated with the Constitutional Democratic Party of Japan, the Mainichi said. In that case, the combined effect of the LDP candidates losing votes and the CDP candidates gaining votes would amount to a net gain of 20,000 votes. This projection indicates that incumbent LDP candidates could be overtaken by CDP candidates in 15 additional districts, the daily predicted.
In the 2024 lower house election, the LDP won in 135 districts, including the three candidates who ran as independents following the slush fund scandal that engulfed all manor LDP factions, while the CDP won in 104 districts. Applying the simulation, even in a scenario where the LDP only lost Komeito’s base votes, the number of seats won in single-seat districts reversed between the LDP and the Constitutional Democratic Party, the Mainichi said. The overall number of seats also resulted in the LDP, previously the largest party, falling below the CDP, it said.
On the data front, December exports are expected to confirm that Japan’s economy is relatively resilient despite the drag from the protectionist U.S. trade policy, which in turn is likely to help Q4 GDP post a slight rebound, reversing the economy’s first contraction in six quarters in Q3.
Consumer inflation data for December is expected to show a sharp deceleration to around the Bank of Japan’s 2% price stability target from the 3% annual rate recorded in November, reflecting slower food price inflation and a decline in energy prices.
– Monday, Jan. 19, 2026
0850 JST (2350 GMT/1850 EST Sunday, Jan. 18) The Cabinet Office releases November machinery orders.
Mace News median: core orders -8.4% m/m (range: -9.4% to -4.9%) vs. Oct +7.0%; +1.0% y/y (range: -0.5% to +5.8%) vs. Oct +12.5%
Japan’s core machinery orders, a key leading indicator of business investment in equipment and software, are forecast to take a breather in November, down 8.4% on the month, after posting an unexpected 7.0% jump in October. Demand for computers from many sectors remains strong, reflecting the need for automation and digitization to address widespread labor shortages.
The Cabinet Office is expected to maintain its assessment that machinery orders are “showing signs of a pickup.” Last month, it upgraded its view for the first time since the November 2024 report.
From a year earlier, core orders excluding those from electric utilities and for ships are projected to rise a modest 1.0% for a 14th straight month of increase, after surging 12.5% in October.
– Thursday, Jan. 22
0850 JST (2350 GMT/1850 EST Wednesday, Jan. 21) The Ministry of Finance releases December trade.
Mace News median: exports +6.2% y/y (range: +5.1% to +7.6%) vs. Nov. +6.1%; imports +4.2% y/y (range: +2.2% to +5.6%) vs. Nov +1.3%; trade surplus ¥331.25 billion (range: a surplus of ¥240.00 billion to a surplus of ¥410.80 billion) vs. a revised ¥316.70 billion surplus in November 2025; ¥120.30 billion surplus in December 2024
reflecting solid demand from Europe and Asia that is offsetting the drag from depressed auto exports to the United States. The pace of increase is seen little changed from the 6.1% gain in November, which was up from 3.6% in October. Shipments to the key U.S. market may slip back to a drop from a year earlier when they stood high at ¥2.03 trillion. Japanese exports to the U.S. posted their first rise in eighth months in November, rising 8.8% to ¥1.82 trillion.
The focus is on seasonally adjusted real exports in the final quarter of 2025, an important factor for forecasting the gross domestic product for October-December.
The Bank of Japan’s real export index rebounded 6.6% on the month in November after slipping 3.7% in October and rising 2.8% in September. The index rose 1.4% in the October-November period on the third quarter, when it dipped 1.4%. The BOJ releases the summary of real trade data for December and Q4 at 1400 JST (0500) on Thursday, Jan. 22 and details on Tuesday, Jan. 27.
Economists expect the Q4 GDP to show a slight rebound but warned that the outlook for external demand remains uncertain as the full impact of the protection U.S. trade policy may be emerging toward the end of the year.
Japan’s economy posted its first contraction in six quarters in the July-September quarter, down 0.6% on quarter, or 2.3% annualized, as it was hit by a pullback in net exports after U.S. tariffs front-running skewed exports higher in April-June when the GDP grew 0.5%, an annualized 2.1%. Domestic demand trimmed total domestic output by 0.4 percentage point while net exports (exports minus imports) lowered GDP by 0.2 point.
Exports in December are expected to be led by computer chips, non-ferrous metals and semiconductor-producing equipment, largely as seen in November. Shipments of ships and steel likely dipped, judging from the official data for the first 20 days of December.
Import values are also expected to rise for the fourth straight month, up 4.2%, as higher purchases of telecommunications equipment (smartphones), drugs and computers chips appear to have more than offset the effects of weaker prices of crude oil, coal and non-ferrous metals. It would follow a 1.3% rise in November.
The trade balance is projected to post its second straight surplus after recoding the first positive figure in five months in November. The surplus is estimated at ¥332.15 billion, up from a revised ¥316.70 billion surplus in November and a ¥120.30 billion surplus in December 2024.
– Thursday, Jan. 22
TBA – The Cabinet Office releases the government’s monthly economic report for January, which is expected to be little changed from the previous one. Japan ‘s economy has shown some resilience, tiding over the Trump tariff storms, but its recovery has been moderate against the headwinds of elevated costs of living amid high import prices and rising labor costs, the latter of which should support consumption if wage hikes exceed inflation.
In its December report, the government maintained its overall assessment, saying the economy is “recovering at a moderate pace, although the effects of the U.S. trade policy are seen mainly in the auto industry.” The official assessment was last upgraded in August 2024, following a downgrade in February that year.
Official descriptions of key components of the economy point to a wobbly pace of recovery from the pandemic slump. Consumer spending is “showing signs of a pickup” while business investment in equipment and software is “picking up moderately.” Among soft spots, industrial production has been “flat” and exports are also “largely flat.”
Policymakers are holding on to their conviction that the Japanese economy will stay on a modest recovery track as the November trade data showed a rebound in exports to the key U.S. market despite the drag from stiff import duties on autos and metals.
In its near-term outlook, the government repeated its recent statement, saying, “The improvement in the employment and income conditions and the effects of various (fiscal) policies are expected to support a moderate recovery while the impact of the U.S. trade policy needs a close watch.”
The report came on the heels of the Bank of Japan’s well-communicated move to raise interest rates and its repeated pledge to continue raising rates as part of its normalization process after decade-long large-scale monetary easing that began in 2012 under the then Prime Minister Shinzo Abe’s reflationary program.
Friday, Jan. 23
0830 JST (2330 GMT/1830 EST Thursday, Jan. 22) The Ministry of Internal Affairs and Communications releases December CPI.
Mace News median: total CPI +2.1% y/y (range: +2.0% to +2.3%) vs. Nov +2.9%; core CPI (ex-fresh food) +2.4% y/y (range: +2.3% to +2.5%) vs. Nov +3.0%; core-core CPI (ex-fresh food, energy) +2.8% y/y (range +2.7% to +3.0%) vs. Nov +3.0%
Japan’s consumer inflation is expected to decelerate sharply by seven to eight ticks in two of the three key measures in December to around the Bank of Japan’s 2% price stability target, in reaction to a double-digit percentage rise in energy costs a year earlier. It is also thanks to the recent easing trend in processed food price hikes that had seen a spike caused by protracted domestic rice supply shortages and higher import costs. An expected sharp slowdown in total CPI’s annual rate mirrors a drop in fresh food prices.
The core CPI (excluding fresh food) is forecast to rise 2.4% on the year in December, down sharply the 3.0% increase in November. The total CPI is expected to rise 2.1%, also slowing down from 2.9% previously. Underlying inflation, as measured by the core-core CPI that excludes both fresh food and energy, is seen easing slightly to 2.8% from 3.0%.
– Friday, Jan. 23
c.1130 JST (0230 GMT the same day/2230 EDT Thursday, Jan. 22) The Bank of Japan releases the outcome of its two-day policy board meeting in monetary policy statement. It also issues the board’s median-term growth and inflation projections as well as risk analysis in its quarterly Outlook Report. The previous meeting on Dec. 18-19 ended at 1212 JST (0312 GMT/2212 EST) and the BOJ released the statement at 1219 JST (0319 GMT/2219 EST).
– Friday, Jan. 23
1530 JST (0630 GMT/0230 EDT) BOJ Governor Kazuo Ueda holds an hour-long news conference to discuss the board’s decision.
The Bank of Japan’s nine-member board is expected to stand pat for now, staying the course of gradual policy normalization, after having decided unanimously to raise the target for the overnight interest rate by 25 basis points (0.25 percentage point) to a 30-year high of 0.75% at its last meeting on Dec. 18-19. The board pointed to easing uncertainties over U.S. trade rows and growing expectations that firms will continue raising wages into fiscal 2026 staring in April.
The BOJ is also expected to maintain its view that Japan’s economy will settle around 2% inflation once the impact of prolonged domestic rice supply shortages has completely faded. The latest outlook is: “In the second half of the projection period (fiscal 2025 through fiscal 2027), underlying CPI inflation is likely to be at a level that is generally consistent with the price stability target.
The board’s median forecast for the year-on-year increase in core CPI (excluding volatile fresh food prices) is expected to be little changed at 1.8% in fiscal 2026 that begins on April 1 and 2.0% the following year. Given the resilient economy despite the Trump tariff storms, the board’s median GDP projection is likely to be revised up slightly to around 1.0% for fiscal 2026 from 0.7% projected in October while the 1.0% growth forecast for 2027 is expected to be unchanged.
BOJ Governor Kazuo Ueda told a news conference on Dec. 19 that the board would discuss the need to raise rates further, taking “one meeting at a time” and that its policy decisions would be “data- and information-dependent.” After the latest action, the short-term rate at 0.75% is “still slightly below the lower end of the estimated neutral rate,” he said, referring to the evasive measure often described as a moving target that is neither too stimulative nor too restrictive to economic activity.
The December action was the bank’s first rate hike since January 2025, when it lifted the policy rate by 25 basis points to 0.5% in an 8 to 1 vote amid increasing signs that major firms would maintain substantial wage hikes into fiscal 2025. It was also its fourth increase during the current normalization process that began in March 2024 with its first rate hike in 17 years and an end to the seven-year-old yield curve control framework in a 7 to 2 vote. In July 2024, the board voted 7 to 2 to hike the policy rate to 0.25% from a range of 0% to 0.1%.