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Japan’s exports extended their recent run in December, but a sharp fall in US-bound shipments and stronger imports narrowed the trade surplus.

The data is here:

• Japan data: December trade surplus smaller than expected (import jump, export growth slow)

Adding more now.

Summary:

• Japan exports rise for fourth straight month

• December growth misses forecasts at 5.1% y/y

• US-bound shipments fall sharply

• Imports jump, narrowing trade surplus

• BOJ remains alert to inflation risks

Japan’s exports rose for a fourth consecutive month in December, supported by a weaker yen and solid demand outside the United States, though the headline gain fell short of market expectations and masked a sharp drop in US-bound shipments.

Government data showed export values increased 5.1% year-on-year in December, easing from a 6.1% rise in November and undershooting the median forecast for a 6.1% gain. The latest figures nonetheless extend a run of monthly increases, highlighting the continued support provided by currency depreciation and resilient overseas demand.

The regional breakdown was mixed. Exports to the United States fell 11.1% y/y, reflecting softer US demand and the lagged effects of trade policy uncertainty. In contrast, shipments to China rose 5.6% y/y, helping to offset weakness elsewhere and reinforcing signs of stabilisation in regional trade flows. Officials also pointed to the weaker yen as a key factor boosting export values, improving price competitiveness for Japanese manufacturers.

Imports grew 5.3% y/y, comfortably exceeding expectations for a 3.6% rise, signalling firmer domestic demand and higher input costs. As a result, Japan recorded a trade surplus of ¥105.7 billion, significantly smaller than forecasts for a surplus of around ¥356.6 billion.

Overall export performance in recent months has been underpinned by a combination of yen depreciation, a still-firm US economy earlier in the quarter, and the September trade agreement with Washington that established a baseline 15% tariff on most goods. While US-bound exports weakened in December, the broader impact from US tariffs has so far proven milder than initially feared.

Reflecting easing trade concerns and improved momentum, the government recently revised up its economic growth forecast for the fiscal year ending in March to 1.1%, from 0.7%. Against this backdrop, the Bank of Japan raised its policy rate to 0.75% in December, the highest level in three decades, and is widely expected to reaffirm its readiness for further tightening as yen weakness and wage dynamics keep inflation risks in focus.

This article was written by Eamonn Sheridan at investinglive.com.

Posting this very solid jobs data, I’ll be back with more on this separately.

For background, preview is here:

• Economic and event calendar in Asia: Australian jobs report, unemployment expected to rise

From a now unemployed graphic artiste 😉

This article was written by Eamonn Sheridan at investinglive.com.

Both exports and imports solid in the month, although exports did miss expectations.

Exports to:

• EU +2.6% y/y
• Asia +10.2% y/y
• US -11.1% y/y
• China +5.6% y/y

This article was written by Eamonn Sheridan at investinglive.com.

A theoretical estimate of jet-engine power capacity has revived interest in the US aircraft “Boneyard,” though real-world hurdles remain formidable.

Summary:

• Retired US military aircraft engines flagged as power source

• Theoretical capacity estimated near 40,000 MW

• Turbofan engines offer most potential

• Conversion costs and logistics remain prohibitive

• Concept highlights data-centre power constraints

The vast “Boneyard” of retired US military aircraft in the Arizona desert has long been seen as a graveyard for ageing hardware. Now, amid a global scramble for fast-deployable power, it is being floated as a potential, if highly theoretical, source of electricity generation.

Located at Davis-Monthan Air Force Base, the Boneyard houses roughly 4,000 retired military aircraft. With data-centre operators increasingly turning to modified jet engines as temporary or back-up power sources, the question has emerged: could the engines from these aircraft be repurposed to generate electricity at scale?

On paper, the numbers are eye-catching. A rough estimate suggests the engines once used by aircraft in storage could theoretically deliver up to 40,000 megawatts (MW) of capacity, around 10% more than Arizona’s current total generating capacity. But this headline figure comes with heavy caveats. The estimate reflects theoretical output, not deployable power, and assumes engines remain intact, serviceable, and available after an average of more than a decade in storage.

The largest potential contribution would come from turbofan engines, which could account for around 32,000 MW of capacity. Aeroderivative power turbines already exist, using aircraft engine cores adapted for electricity generation. For example, GE Vernova’s LM6000 turbine is derived from the CF6 aircraft engine family, and refurbished CF6 units are already commercially available. Even so, purpose-built power turbines are typically more efficient and optimised than retrofitted aviation engines, raising questions over cost and performance.

Other engine types offer far less promise. Turboshaft engines from retired helicopters may collectively amount to around 1,600 MW, but their small size, removal complexity and inferior efficiency compared with modern diesel generators make large-scale deployment questionable. Turboprop engines, including those from aircraft such as the C-130 Hercules, could theoretically add another 7,300 MW, though conversion costs would again be substantial.

In practice, the idea looks more like an illustration of energy scarcity than a near-term solution. While repurposing some engines may be feasible for niche applications, the Boneyard is unlikely to become a meaningful power source without costs and logistical hurdles overwhelming the benefits.

US Energy Administration (EIA) the source for this … and its not even April 1 😉

This article was written by Eamonn Sheridan at investinglive.com.

South Korea’s economy unexpectedly shrank in Q4 as weak investment and exports overwhelmed modest gains in consumption.

Summary:

• South Korea GDP contracts 0.3% q/q in Q4

• Biggest quarterly contraction since late 2022

• Investment and exports drag heavily on growth

• Consumption offers only modest support

• Full-year growth slows to 1.0% in 2025

South Korea’s economy unexpectedly contracted in the final quarter of 2025, delivering its sharpest quarterly downturn in three years and underscoring growing headwinds from weak investment, soft trade flows and fragile domestic demand.

Advance estimates from the Bank of Korea showed gross domestic product shrank 0.3% quarter-on-quarter on a seasonally adjusted basis in the October–December period, sharply missing market expectations for a 0.1% expansion. The contraction followed a strong 1.3% rebound in the third quarter, highlighting increased volatility in growth momentum toward year-end.

On an annual basis, GDP grew 1.5% year-on-year, slowing from 1.8% in the previous quarter and undershooting forecasts for a 1.9% rise. The Q4 outcome marked the weakest quarterly performance since late 2022 and capped a year of slowing expansion for Asia’s fourth-largest economy.

The breakdown of activity pointed to broad-based weakness. Facility investment fell 1.8% q/q, reflecting subdued corporate spending amid elevated borrowing costs and lingering uncertainty over global demand. Construction investment dropped 3.9% q/q, extending a prolonged downturn in the property and infrastructure sectors. External demand also weighed heavily, with exports declining 2.1% q/q and imports down 1.7% q/q, signalling both softer global trade conditions and weaker domestic absorption.

Private consumption offered only limited support, rising a modest 0.3% q/q, suggesting households remain cautious despite easing inflation pressures. Analysts noted that the consumption lift was insufficient to offset sharp declines in investment and trade.

For 2025 as a whole, South Korea’s economy expanded 1.0%, down from 2.0% growth in 2024 and marking the slowest annual growth rate since 2020. The weaker trajectory adds to challenges facing policymakers as they balance growth support against financial stability risks, particularly with global demand uneven and domestic investment yet to show sustained recovery.

This article was written by Eamonn Sheridan at investinglive.com.

Japan’s bond market is testing the credibility of fiscal policy as election-driven tax promises collide with rising yields. Reuters have a good piece up I’ve summarised here.

In brief:

• Takaichi’s food tax pledge has shaken Japan’s bond market

• Investors fear erosion of long-standing fiscal discipline

• JGB yields surged to multi-decade highs

• Debt servicing and ageing costs amplify risks

• Policy tools offer limited, short-term relief

Japan’s bond market turmoil sparked by Prime Minister Sanae Takaichi’s pledge to suspend the consumption tax on food may prove difficult to contain, as investors question whether the government is undermining long-standing fiscal discipline at a sensitive moment for the market.

Takaichi’s promise to halt the 8% food levy for two years, a policy once considered politically untouchable, has revived concerns about Japan’s ability to manage the world’s heaviest public debt burden. Even her mentor, former prime minister Shinzo Abe, avoided cutting the consumption tax during the height of “Abenomics,” ultimately opting instead to push through a politically costly tax increase in 2019.

Market anxiety has surfaced quickly. The yield on the 10-year Japanese government bond surged nearly 20 basis points over two sessions earlier this week to a 27-year high, while super-long maturities recorded record sell-offs reminiscent of the UK’s 2022 “Truss shock,” when unfunded tax cuts triggered a collapse in confidence. Although Japan’s situation differs structurally, with limited pension leverage and a more cautious central bank, investors are increasingly uneasy about fiscal slippage at a time when the Bank of Japan is stepping back from years of aggressive bond buying.

Japan’s vulnerabilities are acute. Roughly a quarter of the national budget is already devoted to debt servicing, while ageing demographics are driving relentless growth in social welfare spending. Consumption tax receipts account for more than one-fifth of total revenue, making the proposed suspension — estimated to cost around ¥5 trillion annually — particularly destabilising. Critics argue that once lowered, consumption taxes are politically difficult to restore.

While the government retains technical options to slow the sell-off, including bond buybacks, trimming issuance, or BOJ emergency purchases, analysts warn these tools offer only temporary relief. With elections looming and political parties competing over tax cuts and spending promises, markets fear that fiscal prudence is being sacrificed for electoral gain.

Unless the government outlines a credible funding framework after the election, investors warn bond market volatility may persist, raising the risk that Japan’s fiscal credibility faces a more lasting test.

This article was written by Eamonn Sheridan at investinglive.com.

New Zealand electronic retail card spending data covers about 68% of core retail sales in the country. It’s the main measure of monthly retail activity.

NZD/USD is barely changed on the data.

This article was written by Eamonn Sheridan at investinglive.com.

Australia’s December labour force report is expected to show a rebound in employment after a surprisingly weak November, but the broader picture remains one of a labour market that is gradually cooling rather than sharply deteriorating.

Economists at Westpac note that employment fell by 21.3k in November, extending a run of softer outcomes in recent months. On a three-month average basis, employment growth is now tracking at around 1.4% year-on-year, a pace that is clearly below Australia’s long-run average and consistent with a slowing labour market. That said, Westpac cautions against over-interpreting a single month’s result, particularly given increasingly volatile data since the pandemic as changes in leave-taking behaviour continue to complicate seasonal adjustment.

Importantly, November’s employment decline was not accompanied by a rise in unemployment. Instead, the unemployment level fell modestly, as the participation rate dropped to 66.7%. This fall in participation effectively cushioned the unemployment rate, which held steady at 4.3%. However, Westpac highlights that on a three-month average basis the unemployment rate is clearly trending higher, now sitting around 4.4% compared with 4.1% six months earlier.

Looking ahead to December, Westpac expects a modest bounceback, forecasting employment growth of around 40k. With participation expected to recover slightly to 66.8%, this would see the unemployment rate round up to 4.4%, marking roughly a 0.4 percentage point increase over the past year and reinforcing the narrative of gradual softening rather than abrupt weakness.

A similar rebound story underpins the outlook from Commonwealth Bank of Australia, although with a slightly more optimistic tone. CBA also points to November’s choppy result, which saw employment fall by 27.5k and participation decline by 0.2 percentage points. Drawing on historical patterns, the bank notes that when both employment and participation fall materially in the same month, there is a high probability of a rebound in the following survey. On that basis, CBA forecasts employment to rise by around 35k in December, with participation lifting to 66.8% and the unemployment rate remaining unchanged at 4.3% to end 2025.

Beyond the near-term volatility, CBA remains constructive on the labour market outlook. The bank points to internal indicators suggesting more consistent monthly employment gains ahead, alongside improving economic growth and rising utilisation measures. Together, these signals are seen as supportive of sustained employment growth through 2026, even as the pace of expansion remains more moderate than in the post-pandemic boom.

**

In markets, a broadly in-line or modestly stronger December labour force outcome would be unlikely to generate a major reaction, but the balance of risks still leans toward a slightly firmer AUD if employment rebounds as expected. A solid headline jobs gain and a recovery in participation would reinforce the view that the labour market is cooling only gradually, keeping the Reserve Bank of Australia cautious. That backdrop would tend to support the Australian dollar at the margin, particularly against low-yielding peers, though any upside is likely to be capped by the steady rise in the unemployment trend and the absence of renewed wage pressure. For equities, the ASX would likely take a resilient labour print in stride: stronger employment supports the domestic growth outlook and consumer confidence, but also nudges, at the margin, closer to rate hikes (not in prospect at the moment though). As a result, gains in cyclical and consumer-linked stocks could be offset by relative underperformance in rate-sensitive sectors such as real estate and utilities, leaving the broader index range-bound rather than directionally driven by the data.

This article was written by Eamonn Sheridan at investinglive.com.

• Trump cancels the Greenland tariffs: Says they have the framework of a future deal
• Atlanta Fed GDPNow tracker climbs to 5.4% from 5.3% but there are skeptics
• More signs of the K-shaped economy, this time from United Airlines
• US December pending home sales -9.3% vs +0.4% expected
• Trump in Davos: No nation can secure Greenland other than the United States
• Canada December producer price index +4.9% y/y vs +5.8% expected

Markets:

• Gold up $18 to $4780
• US 10-year yields down 4.2 bps to 4.25%
• WTI crude oil up 27-cents to $60.63
• S&P 500 up 1.5%
• AUD leads, CHF lags

The whole trading day was about You-Know-Who as we awaited his speech from Davos for hints of what was coming next. The fear was that he would say the US was going to annex Greenland at all costs and tariff anyone who stopped him but he didn’t highlight tariffs in his speech and instead talked about how markets had fallen the day before but they were going to go back up and eventually double “sooner than anyone believes”.

That was something of a tell or at least a reminder that Trump is always focused on the Dow Jones Industrial Average. That lent some comfort to market participants and led to some large bids. Those faded somewhat as a meeting between Trump and NATO’s leader kicked off but there where new highs when Trump announced ‘the concept of a plan’ on Greenland and that there wouldn’t be tariffs.

As stocks jumped on that, gold faded to $4780 from as high as $4887 and silver pared back to $90 from a high of $95. Bonds rallied with 10-year yields down 4.6 bps to 4.24%. Some of that bid in bonds may have also reflected the likelihood that the Fed’s Cook remains in her job after some skepticism from the Supreme Court on the case.

Late in the day, Trump also said on CNBC that he hopes there will be no further action on Iran, something that could weigh on oil.

This article was written by Adam Button at investinglive.com.

Stock futures are ripping higher and at the session highs after this post from Trump:

Based upon a very productive meeting that I have had with the Secretary
General of NATO, Mark Rutte, we have formed the framework of a future
deal with respect to Greenland and, in fact, the entire Arctic Region.
This solution, if consummated, will be a great one for the United States
of America, and all NATO Nations. Based upon this understanding, I will
not be imposing the Tariffs that were scheduled to go into effect on
February 1st. Additional discussions are being held concerning The
Golden Dome as it pertains to Greenland. Further information will be
made available as discussions progress. Vice President JD Vance,
Secretary of State Marco Rubio, Special Envoy Steve Witkoff, and various
others, as needed, will be responsible for the negotiations — They will
report directly to me. Thank you for your attention to this matter!

The S&P 500 is up 1.3%

This article was written by Adam Button at investinglive.com.

Shares of United Airlines are up 1.8% today after earnings. UAL stock of off the record high set earlier this month by about 8% but airlines continue to offer an interesting window into the real economy.

Similar to Delta Airlines (who reported last week), virtually all the growth was in the premium end of the plane.

For the year, premium revenues increased approximately 11%, while standard and Basic Economy revenues were down approximately 5%. The trend was the same in the fourth quarter. The trend isn’t just premium improving while the lower classes stay flat, basic economy revenues fell despite a 6% increase in capacity.

That’s a stark reminder that two different economies are operating in the United States at the moment.

For the airline industry in particular, the loyalty business is a booming one. Airlines basically pioneered the loyalty industry and United highlighted that revenues were up 9% and payments from global co-brands were up 12%. There is a saying in airlines now that they’re loyalty businesses with planes attached to them.

Looking ahead, the company highlighted strong bookings.

Based on what we’ve seen so far this year, bookings and yields are outpacing the strong start from last year, and we’re hopeful that the momentum will continue, which could admittedly cause our guidance to feel a bit conservative.

The company also noted strong business booking so far this year, which is a good sign for the economy.

Another notable ongoing shift for airlines is that travel is being spread out across the year. Where it was once families and workers traveling on holidays and in the summer, it’s now wealthy baby boomers who are traveling on off-peak times. That allows airlines to smooth out capacity and operate more efficiently.

Looking to the first quarter at United, they expect earnings per share to be between $1 and $1.50, an approximately 37% earnings improvement versus the first quarter of last year. Building off a strong quarter for the full year 2026, they expect earnings per share to be between $12 and $14. At the midpoint, this represents over 20% growth and implies continued margin expansion as we march towards double-digit margins.

In 2025, the company generated $2.7 billion in free cash flow and, in 2026, they expect to deliver a similar level of free cash flow despite higher aircraft deliveries. That’s a 7.7% FCF yield on a $35 billion market cap. The company plans to deleverage and invest in aircraft until the end of the decade, when it will then be in an enviable position. The company has been buying back shares and has $782 million left in its authorization.

In terms of investment, CIBC is out with a note on how they expect large carriers to chew up discount airlines.

We expect carriers with higher exposure to premium,
corporate, and loyalty-driven demand to demonstrate greater resilience in
yields and margins in 2026, relative to leisure-focused peers.

That sounds like United and chief executive Scott Kirby said something similar:

I think the structure of the industry is ultimately going to be low-cost carriers will shrink down to the niche that works for low-cost carriers. That is big leisure markets. And I don’t know if they’re going to liquidate, if they’re going to merge, if they’re just going to all shrink, for sure. But they’re going to shrink down to the niche that works.

He was also ruthless in some comments about American Airlines and the battle for dominance in Chicago. He highlighted that United’s focus on loyalty has vaulted it far ahead of American, and that its competitor will lose $1 billion at the hub this year, despite big investments to try and get market share.

I think there’s going to be 2 brand-loyal airlines [UAL and DAL]. That’s already the case. I gave you the numbers in Chicago. That game is over. I realize that not everyone knew the game was on. The game is over. And when we have that big of a lead with customers, like you just don’t win it back because you’d have to have technology, product and services that were somehow better than United and somehow better than Delta to even start. And you’re a decade behind.

That kind of competitive spirit is good for consumers.

This article was written by Adam Button at investinglive.com.

The latest Atlanta Fed GDPNow tracker is out and it’s up to 5.4% annualized in the fourth quarter from 5.3% previously. It’s a tough quarter to track because so much of the data has been screwed up by the long US government shutdown.

Today’s construction spending numbers along with some recent data has been led to the change:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2025 is 5.4 percent on January 21, up from 5.3 percent on January 14. After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, and the Federal Reserve Board of Governors, increases in the nowcasts of fourth-quarter real personal consumption expenditures growth and fourth-quarter real gross private domestic investment growth from 3.1 percent and 5.1 percent, respectively, to 3.2 percent and 6.4 percent, were partially offset by a decrease in the nowcast in the contribution of net exports to fourth-quarter GDP growth from 1.99 percentage points to 1.88 percentage points.

The economists over at Pantheon Macroeconomics aren’t buying it.

In a new note to clients, Chief US Economist Samuel Tombs called the forecast “highly questionable” and “far too optimistic.”

The crux of the argument from Pantheon is that the GDPNow model is a black box that spits out a number without any “sensible judgment calls” on data quirks or shifting trends.

There is almost no hard data for December, very little for November, and even October has gaps. They remind us that at this stage in the game, the GDPNow model has a historical average error of 1.2 percentage points—and has missed by as much as 3.6 points in the past.

The real difficulty is that GDPNow is projecting 3.1% growth in consumer spending. Pantheon calls this “hard to fathom.” Specifically, the model sees 1.8% growth in goods spending, while Pantheon’s own mapping and Bloomberg’s Second Measure indicator suggest spending on goods is actually flat.

Along the same lines, while the Fed model sees 3.7% growth in services spending, Pantheon’s “high-frequency indicators”—like hotel occupancy, TSA passenger counts, and even Google searches for “cancelling subscriptions”—suggest the sector is losing momentum.

Pantheon also notes a weird tension in the projections. The model assumes a massive 2.0 percentage point contribution from net foreign trade and a 0.8 point boost from inventories. Historically, these two usually move in opposite directions.

Trump was touting the quarterly annualized number as if it was an annual number today at Davos, but even if we do get 5.4% q/q annualized growth in Q4 and the Q3 number of 4.3% holds up (the final report is tomorrow), then that’s only 3.16% GDP growth for the year. That’s very good but it’s not amazing.

This article was written by Adam Button at investinglive.com.