Tokyo, October 20, 2025 — Financial markets in Asia opened the week on a cautiously upbeat note as reports emerged of a possible coalition between Japan’s Liberal Democratic Party (LDP) and the Japan Innovation Party, according to Reuters (October 20, 2025). The discussions, reportedly centered on economic cooperation and tax reform, have fueled optimism that a new alliance could pave the way for expanded fiscal stimulus and infrastructure investment. The Nikkei 225 index gained 0.4% in early trading, reflecting improved investor confidence.
Economists believe such a coalition could give the government more flexibility to stimulate growth while addressing persistent wage stagnation. “If the LDP-Innovation bloc materializes, it may push for an additional budget focused on domestic demand,” said Takashi Yamada, senior economist at Nomura Securities, in a note quoted by Nikkei Asia (October 19, 2025). The yen remained largely stable around 149.7 per dollar, as currency traders awaited concrete policy details.
China’s Growth Steady but Housing Weakness Persists
Across the East China Sea, Reuters and Bloomberg reported that China’s economy grew 1.1% quarter-on-quarter and 4.8% year-on-year in Q3 2025, based on official data from the National Bureau of Statistics (NBS) released October 19. The growth was driven primarily by industrial output, which rose 5.3% annually amid stronger renewable energy and semiconductor production. However, consumer confidence and retail sales remained subdued, with the services sector expanding only modestly.
China’s property market continues to weigh on recovery. According to Caixin Global (October 18, 2025), property investment fell 8.7% year-to-date, reflecting ongoing liquidity stress among developers such as Country Garden and Evergrande. “China’s manufacturing has found its footing again, but the housing sector remains a systemic risk,” said Zhang Wei, an economist at HSBC China, quoted by South China Morning Post (October 19). Beijing is reportedly considering new credit support programs to stabilize the sector by year-end.
Elsewhere in the region, markets diverged. The Hang Seng Index climbed 0.6% on strength in technology shares, while South Korea’s KOSPI slipped 0.3% amid concerns over weaker semiconductor demand, according to MarketWatch (October 20). Meanwhile, Australia’s ASX 200 traded flat as investors digested mixed commodity prices. Analysts at JP Morgan Asia-Pacific noted that a combination of steady U.S. monetary policy and moderate Chinese recovery “could anchor Asian markets in the short term.”
Overall, sentiment across Asia remains cautiously optimistic. As Reuters summarized, Japan’s political developments and China’s manufacturing resilience have brightened the regional outlook, though sustained recovery hinges on structural reforms and global monetary stability. “Asia’s growth story isn’t over,” said Rina Patel, strategist at JP Morgan Asia-Pacific. “But it’s evolving into a marathon rather than a sprint.”
