FX168 Financial News (Asia Pacific) News The Tokyo stock market rose for the third day in a row on Wednesday (December 11), as defense-related stocks were boosted by the government's plan to raise taxes starting in 2026 to cover the defense budget. Investors are concerned about China's decision to ease monetary and fiscal policies to deal with US tariffs.

By the close, the Nikkei Average, which includes 225 constituent stocks, rose 4.65 points, or 0.01%, to close at 39,372.23 points. The broader TSE index rose 7.90 points, or 0.29%, to close at 2,749.31 points. #日本市场 #

In the primary main board market, insurance, banking, and textile and apparel stocks led the way.

On the main board of the Tokyo Stock Exchange, the number of rising stocks surpassed the falling stocks. There were 823 and 750 stocks, respectively, while 71 stocks remained flat.

Earlier data showed that Japan's producer price index (PPI) rose 3.7% year on year in November, higher than market expectations of 3.4%, and recorded the fastest growth rate since July 2023. This data has sparked market speculation that the Bank of Japan may announce further interest rate hikes at the upcoming monetary policy meeting to benefit bank stocks.

In contrast, semiconductor stocks were under severe pressure, and the stock prices of companies such as Advantest, Tokyo Electronics, and Disco all fell sharply.

As investors waited for key US inflation data to be released later in the day and did not actively trade, the exchange rate of the US dollar against the yen remained generally fluctuating in the Tokyo market above 151 yen.

Defence-related stocks are highly sought after by the market. Earlier, it was reported that the Japanese government plans to raise corporate and tobacco taxes starting in April 2026 and raise income taxes from 2027 to help pay almost double the defense budget.

Analysts said, however, that as weighted semiconductor-related stocks followed the overnight decline of their US peers, the overall performance of the market was limited throughout the day.

Furthermore, since the Bank of Japan and the Federal Reserve's monetary policy meeting will be held next week, investors are cautious. The upcoming US Consumer Price Index (CPI) data could influence the Federal Reserve's decisions.

“Market trends lack a clear direction, and investors take a wait-and-see attitude before the US CPI data is released, trying to find opportunities to buy or sell from small clues,” said Toshikazu Horiuchi, a stock market strategist at Iwai Cosmo Securities.

One of the key factors in market sentiment is China's decision to relax monetary policy. Beijing ended a 14-year “prudent” stance to stimulate economic growth, but the move raised concerns about potential debt risks.

Japanese manufacturer confidence turned negative in December, falling to -1 from +5 in November, according to a short Reuters survey. This change reflects concerns about US protectionist policies and the Chinese economy, and challenges the Bank of Japan's recovery expectations. However, the confidence index is expected to rebound to +5 by March next year.

Furthermore, Japan's Cabinet Office reported that the Business Survey Index (BSI) of large manufacturers rose to 6.3 in the fourth quarter, up from 4.5 in the third quarter. The non-manufacturing sector rose to 5.4 from 4.7 in the first quarter.