In Japan, Prime Minister Takaichi secured a decisive victory over the weekend, as her recently called election delivered a landslide majority for the Liberal Democratic Party – a feat that has eluded many leaders in recent years. Her campaign centred on a commitment to revive traditional Abenomics, using fiscal stimulus to address slow growth within the region while also acknowledging Japan’s position as the world’s most heavily indebted nation. Markets responded positively, continuing the so-called “Takaichi trade,” with Japanese equities climbing to record highs on Monday and the yen recouping some recent losses.
This week, global leaders are convening at the Munich Security Conference. Last year’s National Security Strategy urged Europe to take greater responsibility for its own defence, a message that has gained urgency as President Trump has publicly stated his intention to acquire Greenland on national security grounds. Ahead of the conference, French President Emmanuel Macron spoke to journalists on Monday, calling for faster implementation of reforms to safeguard the bloc. He warned that Europe now faces mounting pressure from two fronts: the United States and China.
In the United States, retail sales were flat month-on-month in December 2025, according to data released after delays caused by the government shutdown. Spending came in below economists’ expectations, with annual growth slowing to 2.4% from 3.3% in November. While the latest figures may add weight to the case for monetary easing – suggesting consumers are feeling a pinch in their expendable income – the broader economic picture remains mixed. Employers remain in a “no hire, no fire” stance, yet consumer spending held up at a moderate pace throughout 2025, and GDP growth from July to September reached its fastest rate in two years. Attention now turns to Friday’s CPI release as sustained evidence of cooling inflation could prompt the Federal Reserve to consider rate cuts in the first half of 2026.
In China, consumer price inflation rose for the fourth consecutive month, with the CPI increasing by 0.2% year-on-year in January, easing from a 0.8% rise in December. Core CPI – which excludes volatile food and energy prices and is considered a better measure of underlying supply and demand conditions – also moderated, rising 0.8% year-on-year in January compared with 1.2% in December. Part of the January increase is being attributed to the shifting timing of the Lunar New Year, which altered the comparative base and affected year-on-year calculations.
Still to come this week we have UK GDP.
Nicola Tune, Portfolio Specialist
