Japan's Economy Likely Rebounded in Q4 2025 on Investment

Michelle

Central Bank

Political

Data Interpretation

Remarks of Officials

Economic

Summary:

Japan's economy likely rebounded in Q4 2025, propelled by corporate investment and resilient consumer spending.

Japan's economy is expected to have returned to growth in the final quarter of 2025, reversing a significant contraction from the previous period. A Reuters poll of economists indicates that the recovery was fueled by strong corporate investment and resilient consumer activity.

Forecast Points to 1.6% Annualized GDP Growth

The median forecast among 16 economists suggests that Japan's real gross domestic product (GDP) expanded at an annualized rate of 1.6% in the October-December period. This marks a notable turnaround from the 2.3% drop recorded in the third quarter, which was the steepest decline in two years.

Without annualization, the quarterly growth rate is estimated at 0.4%. According to Naoki Hattori, chief Japan economist at Mizuho Research & Technologies, this return to expansion "would confirm that the Japanese economy remains on a gradual recovery path."

What's Driving the Expected Recovery?

The anticipated growth is primarily supported by two key pillars of the domestic economy: business spending and private consumption.

Strong Corporate Investment Leads the Way

Capital expenditure is seen as a major driver, projected to have grown by 0.8% after contracting 0.2% in the previous quarter. This rebound is underpinned by positive business sentiment, as a Bank of Japan (BOJ) survey in December showed that confidence among large manufacturers had reached a four-year high.

Consumption Remains Resilient Despite Inflation

Private consumption, which accounts for more than half of Japan's GDP, is forecast to have edged up by 0.1%. This modest growth is considered resilient, as it occurred while consumer inflation continued to run above the Bank of Japan's 2% target, putting pressure on household budgets.

Trade and Monetary Policy Factors

External demand also played a positive role, while the economic data influenced central bank policy. Net exports are estimated to have added 0.1 percentage points to fourth-quarter GDP growth. This contrasts with the third quarter, when trade subtracted 0.2 percentage points from growth, partly due to the initial impact of U.S. tariffs on exports.

The milder-than-expected economic fallout from the tariffs appears to have given the Bank of Japan confidence. The central bank raised interest rates to 0.75% from 0.5% in December and later upgraded its forecasts for both economic growth and inflation.

Looking ahead, Prime Minister Sanae Takaichi has committed to boosting the economy with proactive fiscal policy, a pledge made in the run-up to a snap election on Sunday. These promises sent government bond yields to record highs last month.

The official preliminary GDP data for the fourth quarter of 2025 will be released by the government on February 16 at 8:50 a.m. local time (2350 GMT on February 15).

To stay updated on all economic events of today, please check out our Economic calendar

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Gerik

Cryptocurrency

A Sharp Decline That Challenges Expectations

Bitcoin’s slide from above $126,000 in October to below $64,000 has erased gains accumulated during the early phase of Donald Trump’s second term, despite a regulatory backdrop that many believed would support higher prices. The launch of spot Bitcoin exchange-traded funds in early 2024 was widely expected to draw in new investors and stabilize demand. Instead, the latest sell-off has underscored how sensitive crypto remains to shifts in sentiment and liquidity.

This downturn has coincided with heightened geopolitical tension, broader market volatility, and a more cautious investor mindset. While the wider economy has shown resilience, risk appetite has weakened, and Bitcoin has responded with sharper losses than most traditional assets.

Why Bitcoin Moves More Violently Than Other Assets

Bitcoin’s behavior during periods of stress reflects structural characteristics rather than a temporary anomaly. Unlike equities or bonds, it generates no income or cash flow. Its valuation depends almost entirely on what investors are willing to pay, making price movements heavily sentiment-driven. Research from S&P Global Ratings has previously shown that cryptocurrencies tend to amplify broader market volatility, swinging more aggressively when risk appetite rises or falls.

This relationship is causal, not merely correlational. When liquidity tightens or confidence fades, speculative assets like Bitcoin often experience outsized moves. Some strategists warn that if selling pressure persists, prices could fall significantly further, potentially testing levels well below current prices.

Portfolio Decisions Depend on Purpose, Not Predictions

Financial advisors emphasize that there is no universal answer to whether investors should hold, buy, or sell after a steep decline. The appropriate response depends on how Bitcoin fits into an individual’s broader financial plan and tolerance for volatility. Historically, Bitcoin has moved in pronounced cycles, with dramatic rallies followed by drawdowns of 60% or more. The current decline fits that long-established pattern.

From a portfolio construction perspective, many planners argue that Bitcoin remains a speculative allocation rather than a foundational asset. Advisors who are comfortable with crypto at all tend to recommend limiting exposure to a small percentage of total assets, typically in the low single digits, and only for investors with strong balance sheets and a high tolerance for risk. In that framework, downturns do not redefine Bitcoin’s role but instead reaffirm its uncertainty.

Long-Term Thesis Versus Short-Term Reality

Some investors continue to view Bitcoin as a long-term store-of-value asset, citing its capped supply and independence from governments and central banks. From that perspective, sharp sell-offs are seen as inherent to the asset rather than a refutation of its long-term thesis. The key question for holders is not whether prices have fallen, but whether the underlying reasons they bought Bitcoin in the first place have fundamentally changed.

At the same time, critics point out that without income generation, long-term returns rely solely on future price appreciation and an investor’s ability to withstand prolonged drawdowns. This makes Bitcoin unsuitable as a replacement for traditional building blocks such as diversified equity exposure, bonds, or emergency savings.

The fall below $64,000 is less a definitive buying opportunity or exit signal than a reminder of Bitcoin’s nature. It can enhance returns in favorable cycles, but it can also magnify losses when sentiment turns. For most investors, the episode reinforces a familiar conclusion. Crypto may have a place as a small, high-risk component of a diversified portfolio, but it is not essential, and it should only be held in amounts one can afford to see fluctuate sharply without derailing broader financial goals.

Source: CNBC

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King Ten

Political

Remarks of Officials

Economic

India's Commerce Minister Piyush Goyal has signaled a major expansion of trade with the United States, announcing that New Delhi is prepared to place orders for up to $80 billion in Boeing aircraft.

Figure 1: Indian Commerce Minister Piyush Goyal, a key figure in the country's trade negotiations, outlined the potential for a landmark aircraft deal with the United States.

Speaking on Thursday, Goyal stated that India's demand for aircraft includes nearly $80 billion in orders for Boeing that are "yet to be placed but ready." He added that factoring in engines and spare parts could push the total value of these U.S. imports to over $100 billion from the aviation sector alone.

This potential deal comes as Boeing faces a lawsuit from the families of passengers who died in an Air India crash in Ahmedabad last June. The lawsuit alleges that defective dual switches contributed to the disaster, which claimed 241 of the 242 lives on board.

Beyond aviation, Goyal noted the potential for India to procure at least $500 billion in goods from the U.S. over the next five years. However, he clarified that this figure does not represent an explicit investment commitment within the U.S.-India trade agreement.

Trump's Claims vs. India's Cautious Stance

The announcement followed a social media post on Monday from U.S. President Donald Trump, who declared that Washington and New Delhi had reached a trade agreement.

According to Trump, the deal involves several key concessions:

• The U.S. will reduce tariffs on Indian goods to 18%.

• India will lower duties on American goods to zero.

• India will replace Russian oil with supplies from the U.S. and Venezuela.

• India will open sensitive markets, including agriculture.

• India will purchase $500 billion worth of American goods.

While the Indian Prime Minister welcomed the tariff cut from the current 50% rate, he did not confirm the other details outlined by Trump.

Scrutiny Mounts Over Deal's Ambitions

Experts have expressed skepticism about the feasibility of Trump's claims, particularly the $500 billion purchase target, which many have called "a stretch." For context, India's total goods imports for the 2025 financial year stood at $720.24 billion, with only $45.3 billion sourced from the United States.

The Indian government has remained tight-lipped on the specifics of the deal, drawing criticism from opposition parties. Rahul Gandhi, India's opposition leader, accused Prime Minister Modi of being "compromised" and of having "surrendered on Tariffs."

New Delhi has not officially confirmed key elements of Trump's announcement, such as the zero-duty commitment for U.S. goods, the halt of Russian oil imports, or the firm $500 billion purchase plan. Analysts warn that Trump's "unrealistic" claims could jeopardize the deal, drawing parallels to his threats to raise tariffs on South Korea despite a trade agreement.

Timeline for the New Trade Agreement

Minister Goyal provided a timeline for finalizing the initial phase of the trade pact.

A joint statement is expected within the next 3-4 days, after which the new 18% U.S. tariff on Indian exports will take effect. A formal agreement is slated for mid-March, which will activate India's tariff concessions for U.S. goods.

To stay updated on all economic events of today, please check out our Economic calendar

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Michael Ross

Traders' Opinions

Central Bank

Bond

Remarks of Officials

Economic

Japan's two largest banks, Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Financial Group (SMFG), are preparing to increase their holdings of Japanese government bonds (JGBs), signaling a major strategy shift after more than a decade. The move is driven by rising interest rates that now promise higher returns, even as both institutions face unrealized losses on their existing bond portfolios.

A Strategic Reversal After a Decade

For the last ten years, Japan's megabanks steadily reduced their exposure to JGBs. The Bank of Japan's ultra-low interest rate policy meant the returns on these bonds were negligible, forcing lenders to look elsewhere.

That long-standing trend now appears set to reverse.

Yields on JGBs have climbed sharply since November, a move initially triggered by Prime Minister Sanae Takaichi's proposed spending plans. While the sudden rise in yields hurt the value of existing bonds, the market has found a calmer footing in recent weeks. Demand has been solid across the last four debt auctions, and 30-year JGB yields have fallen 32 basis points from their record high of 3.88% on January 20.

"With long-term interest rates showing signs of peaking, I think we'll cautiously rebuild our JGB position," Takayuki Hara, managing director and head of MUFG's CFO office, said at a press briefing.

Navigating Unrealized Losses

The decision to buy more JGBs comes with a significant caveat: rising yields have already inflicted paper losses on the banks' current holdings. When market yields rise, the value of older bonds bought at lower yields falls, creating unrealized losses.

MUFG, Japan's largest lender, reported unrealized losses of 200 billion yen ($1.3 billion) on its bond portfolio at the end of the year, a substantial increase from 40 billion yen at the end of March. The bank noted it had sold longer-duration bonds between September and December, a move that helped it avoid even greater losses.

SMFG, the country's second-largest bank, shares a similar outlook. A spokesperson at its earnings briefing confirmed the bank plans to "gradually increase our JGB positions, taking into account the market outlook." SMFG's own unrealized losses on JGBs more than doubled to 98 billion yen in the nine months leading up to the end of December.

To manage risk, Japan's major banks, including the third-largest player Mizuho Financial Group, have focused on short-duration bonds in recent years. As of December, Mizuho's average remaining period for its JGB holdings was just 1.8 years.

Cautious Market Outlook and Potential Hurdles

Despite the banks' statements, some investors and analysts believe a significant pivot into longer-duration bonds may not be immediate. Several factors could delay substantial purchases:

• The prospect of further rate hikes from the Bank of Japan.

• Market concerns over Japan's enormous national debt burden.

Political developments are also a key variable. With polls suggesting Prime Minister Takaichi is poised to win the upcoming general election, her expansionary fiscal policies could gain momentum, potentially pushing bond yields even higher.

"I think the JGB curve will rise, and the 10-year rate could reach 2.5%," said Toshinobu Chiba, a fund manager at Simplex Asset Management. He added that this level, compared to the current 2.195%, could serve as a more attractive entry point for the banks to start buying in size.

Higher Rates Fuel Record Profits

This strategic shift is taking place against a backdrop of renewed profitability for the banking sector. The Bank of Japan raised interest rates in March 2024 for the first time in 17 years, and three more hikes have followed, bringing the main policy rate to 0.75%.

This new rate environment has directly contributed to all megabanks forecasting record profits for the current financial year. The Topix banking index has surged, doubling in value since the first rate hike in March 2024 and significantly outperforming the broader Topix index's 33% gain.

Analysts predict that increasing their positions in higher-yielding JGBs will further boost bank earnings in the years ahead. Reflecting this optimism, Goldman Sachs analyst Makoto Kuroda recently raised her 2028 financial year forecasts for all three megabanks. Citing the BOJ's December rate hike, the jump in JGB yields, and a weaker yen, she increased net profit estimates for MUFG by 20%, SMFG by 11%, and Mizuho by 21%.

To stay updated on all economic events of today, please check out our Economic calendar

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Thomas

Political

Data Interpretation

Daily News

China–U.S. Trade War

Economic

Vietnam’s trade surplus with the United States expanded by nearly 30% year-on-year in January, driven by a significant climb in exports. Simultaneously, imports from China surged to a new monthly record, according to official data released on Friday.

The export growth comes as Hanoi continues trade negotiations with Washington. These talks follow the Trump administration's imposition of 20% tariffs on Vietnamese products in August and threats of higher duties on goods made with components sourced from China. Despite these tariffs, Vietnam's exports to the U.S. have consistently risen, setting a record high last year.

US Trade Surplus Widens Despite Tariffs

The trend of strong exports to the U.S. continued into the new year, with shipments reaching a value of $13.9 billion in January. This marks a substantial increase from the $10.5 billion recorded in the same period a year earlier, though it is slightly below the $14.6 billion from December.

As a result, Vietnam’s trade surplus with the U.S. reached $12 billion for the month. This figure represents a nearly 30% increase compared to the previous year and is just shy of the $12.3 billion surplus seen in December.

Record Imports from China Drive Overall Deficit

While exports to the U.S. boomed, imports from China hit an all-time monthly high of $19 billion. This is an increase from $18.7 billion in December and a sharp rise from the $12 billion imported in January 2025.

This surge in imports contributed to a wider national trade picture. In total, Vietnam's exports rose 29.7% year-on-year to $43.19 billion. However, total imports soared by 49.2% to $44.97 billion, resulting in an overall trade deficit of $1.78 billion for January.

A Snapshot of Vietnam's Domestic Economy

Beyond trade, other key economic indicators for January showed mixed but generally positive performance:

• Industrial Production: Grew by 21.5% compared to the previous year.

• Consumer Prices: Rose 2.53% year-on-year.

• Retail Sales: Increased by 9.3% from a year earlier.

Foreign Investment Shows Diverging Trends

Foreign investment data presented a more complex outlook. Actual foreign investment inflows into Vietnam during January reached $1.68 billion, an 11.3% increase year-on-year.

However, investment pledges, which serve as an indicator of future capital flows, declined. Pledges fell by 40.6% compared to the same month last year, totaling $2.58 billion.

To stay updated on all economic events of today, please check out our Economic calendar

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FastBull Featured

Daily News

[Quick Facts]

1. Iran's Foreign Minister leads delegation to Oman for Nuclear Talks with U.S.

2. Israeli Military says it struck Hezbollah targets in Lebanon.

3. Russia and Ukraine reach a prisoner exchange agreement.

4. Poll: Japan's ruling party is likely to win over 60% of House of Representatives seats.

5. U.S. and Russia agree to resume a high-level military dialogue.

6. Bitcoin plunges 12.6%, and the cryptocurrency market cap evaporates $2 trillion.

7. Blizzard drives up U.S. Initial Jobless Claims, and Job Openings hit their lowest level in over five years.

8. The Bank of England keeps interest rates unchanged as expected.

9. The European Central Bank keeps interest rates unchanged as expected.

10. Lagarde: The inflation outlook is more uncertain than usual.

[News Details]

Iran's Foreign Minister leads delegation to Oman for Nuclear Talks with U.S.

On February 5th, Iranian Foreign Ministry spokesperson Baghaei said via his social media account that Foreign Minister Araghchi is leading a delegation to Muscat, the capital of Oman, for nuclear talks with the United States. This diplomatic engagement aims to reach a fair, mutually acceptable, and dignified agreement on the nuclear issue.

The statement noted that Iran always considers it its duty to safeguard the rights of the Iranian nation. Meanwhile, Iran also has a responsibility not to miss any opportunity to protect national interests and maintain regional peace and stability through diplomatic means. Iran expressed gratitude to friendly neighboring countries and regional states that have played a role in advancing this process with a responsible and concerned attitude, and hopes the U.S. will also participate in a responsible, realistic, and serious manner. The U.S. and Iran plan to hold nuclear talks in Muscat on the 6th.

Israeli Military says it struck Hezbollah targets in Lebanon

The Israel Defense Forces (IDF) announced on the 5th that it had carried out strikes on multiple Hezbollah targets in Lebanon that day, focusing on destroying underground tunnel shafts used to store weapons. The IDF stated that it had detected Hezbollah activity at the above locations over the past few months, which violated the ceasefire agreement between Israel and Lebanon. So far, Hezbollah has not responded.

Russia and Ukraine reach a prisoner exchange agreement

Ukrainian negotiator and Secretary of the National Security and Defense Council, Umerov, released a communiqué on the results of the latest trilateral talks between Ukraine, the U.S., and Russia on his official social platform on the 5th. The communiqué said that from February 4th to 5th, delegations from the U.S., Ukraine, and Russia held their second trilateral talks in Abu Dhabi, UAE, aiming to promote an end to the Russia-Ukraine conflict. The discussions were constructive, focusing on creating conditions for lasting peace.

The communiqué added that the delegations reached an agreement under which Russia and Ukraine will each release 157 prisoners of war, the first such exchange in the past five months. During the two-day talks, the delegations held extensive discussions on other outstanding issues, including methods to implement a ceasefire and monitor armistice operations. The delegations agreed to report back to their respective capitals and continue trilateral negotiations in the coming weeks.

Poll: Japan's ruling party is likely to win over 60% of House of Representatives seats

A late-campaign poll by Nikkei showed that the ruling coalition of the Liberal Democratic Party (LDP) and Nippon Ishin no Kai is likely to win more than 300 of the 465 seats in the House of Representatives election to be held this Sunday. Meanwhile, the new opposition Centrist Reform Alliance, formed by the Constitutional Democratic Party and Komeito, may see its seats halved from the previous 167. However, many factors could affect voter turnout and decisions, thereby influencing the outcome. The newly established Centrist Reform Alliance has not yet gained widespread support, so its final performance remains unclear. In addition, heavy snowfall may impact voting on election day, especially along the Sea of Japan coast.

U.S. and Russia agree to resume a high-level military dialogue

On Feb 5th, the U.S. European Command said that the U.S. and Russia had reached an agreement in Abu Dhabi, the capital of the UAE, to resume high-level military dialogue. The statement noted that this military communication channel was suspended in the fall of 2021 before the escalation of the Ukraine crisis. During recent trilateral talks in Abu Dhabi, Commander of the U.S. European Command Alexander Grinkevich discussed with senior Russian and Ukrainian military officials and decided to restart the channel. The statement added that resuming military dialogue provides a way to increase transparency and reduce tensions. Grinkevich, who also serves as NATO Supreme Allied Commander Europe, will maintain communication with Russian Chief of the General Staff Valery Gerasimov.

Bitcoin plunges 12.6%, and the cryptocurrency market cap evaporates $2 trillion

Bitcoin tumbled sharply on Thursday, with losses accelerating amid volatility in precious metals and broad selling in tech stocks that weakened risk appetite. Bitcoin fell to an intraday low of $63,222.42, its lowest level since October 2024. Data from CoinGlass showed that approximately $1 billion worth of Bitcoin positions were liquidated in the past 24 hours; since early October, the global cryptocurrency market capitalization has shrunk by $2 trillion cumulatively. Bitcoin has fallen 17% so far this week and 28% year-to-date. Former President Trump's nomination of Walsh as a candidate for Federal Reserve Chair exacerbated Bitcoin's latest slide, as markets expect him to shrink the Fed's balance sheet.

Blizzard drives up U.S. Initial Jobless Claims, and Job Openings hit their lowest level in over five years

Data from the U.S. Department of Labor showed that initial jobless claims rose to 231,000 last week, up 22,000 from the previous week and exceeding expectations due to winter storms. As data volatility from the holiday season and New Year period fades, claims are likely to continue rising. Another Labor Department report, the Job Openings and Labor Turnover Survey (JOLTS), showed that job openings fell by 386,000 to 6.542 million in December, the lowest level since September 2020. Job openings declined across businesses of all sizes: the professional and business services sector accounted for two-thirds of the decline and has fallen for three consecutive months. Some economists attributed this to artificial intelligence.

The Bank of England keeps interest rates unchanged as expected

After its monetary policy meeting, the Bank of England announced it would keep the benchmark interest rate unchanged at 3.75%, in line with market expectations. At the meeting, the Monetary Policy Committee voted 5–4 to maintain the rate. Deputy Governors Ramsden and Breeden, along with committee members Swati Dhingra and Alan Taylor, voted in favor of a 25-basis-point rate cut.

The central bank's statement noted that further rate cuts are likely, but the risk of persistent inflation is currently less pronounced. Judgments about whether to further ease monetary policy will become more difficult. The bank expects inflation to be 1.8% in the first quarter of 2028 and 2% in the first quarter of 2029. Bank of England Governor Bailey pointed out that if everything goes well, there should be room for further rate cuts this year. He expects inflation to fall to around 2% in spring and emphasized the need to ensure it stays at that level.

The European Central Bank keeps interest rates unchanged as expected

After its monetary policy meeting, the European Central Bank (ECB) announced it would keep interest rates unchanged, in line with market expectations. The ECB maintained the deposit facility rate at 2%, the main refinancing rate at 2.15%, and the marginal lending rate at 2.4%.

In its post-meeting statement, the ECB reaffirmed its commitment to ensuring inflation stabilizes at the 2% target over the medium term, and it will decide the appropriate monetary policy stance on a data-dependent, meeting-by-meeting basis. The bank noted that despite a challenging global environment, the economy remains resilient. The Governing Council stands ready to adjust all tools within its mandate to ensure inflation stabilizes at the 2% medium-term target.

Meanwhile, low unemployment, robust private-sector balance sheets, gradual increases in public spending on defense and infrastructure, and the supportive effects of previous rate cuts jointly underpin economic growth. The Governing Council's rate decisions will be based on assessments of the inflation outlook, related risks, and the latest economic and financial data, with no pre-commitment to a specific rate path. However, the outlook remains uncertain, mainly due to uncertainties in global trade policies and geopolitical tensions.

Lagarde: The inflation outlook is more uncertain than usual

Following the ECB’s decision to keep rates unchanged, President Christine Lagarde said at a press conference that the "Outlook for inflation is more uncertain than usual." She noted that the bank discussed exchange rates today, stating that "Stronger Euro could bring inflation down more than now expected." Since March last year, the euro has strengthened. However, it remains within its average range, while underlying inflation is consistent with the 2% target.

Lagarde said eurozone economic growth is primarily driven by services, especially information technology and communications, while the labor market continues to support household incomes. Manufacturing remains resilient despite trade headwinds.

She added that resilience in the eurozone must be enhanced against the backdrop of geopolitics, and the external environment remains challenging, urging governments to continue pushing reforms. Due to tariffs and the euro, the trade environment faces severe challenges. The current global policy environment, marked by increasing uncertainty, could dampen demand if uncertainty rises further.

[Today's Focus]

UTC+8 17:00 ECB Governing Council member Kocher speaks

UTC+8 20:00 Bank of England Chief Economist Pill speaks

UTC+8 21:30 U.S. January nonfarm payrolls

UTC+8 23:00 U.S. preliminary February 1-year inflation expectations

UTC+8 23:00 U.S. preliminary February University of Michigan consumer confidence index

Risk Warnings and Disclaimers

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Gerik

Economic

Stocks

South Korea Leads Regional Declines

Asian markets extended losses for another session, driven by spillover from an intensifying technology rout in the United States. South Korea’s Kospi fell as much as 5% during Friday’s trading before paring losses to around 3.85%, marking one of its steepest daily declines in recent months. The smaller Kosdaq index dropped even more sharply, losing over 5%, highlighting the vulnerability of growth-oriented and technology-heavy stocks.

This sharp move reflects a causal relationship with global tech sentiment rather than domestic fundamentals. South Korea’s equity market has a high concentration of semiconductor and technology exporters, making it particularly sensitive to shifts in U.S. tech valuations and capital expenditure expectations.

Wall Street Tech Signals Trigger Risk-Off Mood

The sell-off in Asia followed a bruising session on Wall Street, where technology stocks led declines. Shares of Alphabet came under pressure after the company flagged a sharp rise in artificial intelligence-related capital expenditure, with spending projected at $185 billion for 2026. While investment in AI is structurally positive for long-term growth, markets interpreted the scale of spending as a near-term drag on cash flow and profitability.

At the same time, Qualcomm slid more than 8% after issuing a weaker-than-expected forecast, citing a global memory shortage. Together, these developments reinforced concerns that the technology sector may be entering a phase of margin pressure and earnings volatility rather than continued smooth expansion.

Regional Markets Follow Lower

Japan’s Nikkei 225 opened down more than 1% and was on track for a third consecutive day of losses, while the broader Topix index also declined. Australia’s S&P/ASX 200 fell around 1.6%, reflecting weakness across mining, technology, and financial stocks. Hong Kong’s Hang Seng Index futures pointed to a lower open, signaling that selling pressure was likely to persist across Greater China markets.

In contrast, mainland China’s Shanghai Composite was relatively stable, edging only slightly lower. This divergence suggests the current bout of volatility is more strongly correlated with global technology sentiment than with domestic Chinese macroeconomic factors.

U.S. Market Weakness Sets The Tone

Overnight in the U.S., the tech-heavy Nasdaq Composite posted the largest decline among major indexes, falling 1.59%. The S&P 500 dropped 1.23%, pushing it into negative territory for the year, while the Dow Jones Industrial Average lost 1.20%. The breadth of the decline underscored a broader risk-off shift rather than an isolated reaction to individual earnings.

The transmission from Wall Street to Asia is largely correlational but amplified by structural linkages. Asian markets, particularly those with heavy exposure to technology supply chains, often react more sharply to changes in U.S. tech valuations due to their reliance on export demand and global capital flows.

Outlook Remains Fragile

The latest market moves suggest investors are reassessing the balance between long-term technological investment and short-term earnings risk. With global liquidity conditions still tight and valuations elevated in parts of the tech sector, Asian equities may remain vulnerable to further volatility if negative earnings revisions or cautious guidance continue to emerge from U.S. technology leaders.

For now, South Korea’s sharp sell-off serves as a barometer of regional sensitivity to global tech sentiment, reinforcing how quickly confidence can shift when growth expectations are questioned.