Japanese Stocks Jump Nearly 3% as Manufacturing Activity Improves and PMI Holds at 50

The Japanese economy showed clear signs of stabilization as the Manufacturing Purchasing Managers' Index (PMI) was revised up to 50.0 in December 2025, from a preliminary estimate of 49.7 and 48.7 in November, ending five consecutive months of decline and marking the highest reading since last June.

Data indicated relative stability in production levels and a slower decline in new orders, including export orders. Employment saw a marginal increase, the strongest in four months, supported by expectations of improving demand ahead. The pace of decline in purchasing activity slowed to its lowest in six months, despite ongoing supply chain pressures and rising raw material and wage costs, prompting companies to pass some of these increases onto selling prices.

Meanwhile, Japanese stocks surged strongly in the first session of the year, with the Nikkei 225 index jumping 2.97% to close at a two-month high, while the Topix index hit a new record. Technology shares led the gains, buoyed by optimism that Japanese companies will benefit from global momentum in artificial intelligence, alongside robust performances from banking and defense industry stocks.

This performance comes amid expectations of continued government support for the economy, after Tokyo reaffirmed its commitment to expansionary spending policies. Investors are also closely watching global geopolitical developments, including the recent events in Venezuela and their impact on international market sentiment.