Global markets opened the week on a quiet note, with public holidays across much of Asia and the United States limiting early trading activity. But Japan’s latest GDP figures quickly grabbed attention, delivering an unwelcome surprise for investors.
Japan’s economy expanded at an annualised rate of just 0.2% in the December quarter, far below market expectations of a 1.6% rebound following a contraction in the previous quarter. Year-on-year growth also slowed sharply to 0.1%, down from around 2% in mid-2025.
While nominal GDP rose by 3.4%, analysts noted that much of that increase was driven by rising prices rather than real economic momentum.
Government spending and imports were among the biggest drags on growth, strengthening the case for Prime Minister Takaichi to push for more aggressive fiscal stimulus. Market chatter has now shifted toward the possibility of a fast-tracked supplementary budget, rather than one later in the year.
Despite the weak data, Japan’s stock market may be due for a pause after the Nikkei climbed 5% last week. Regional markets have also been on a strong run, with Taiwan up 5.7% and South Korea rising more than 8%, boosted largely by chipmakers benefiting from massive AI-related spending by global hyperscalers.
However, some analysts are raising concerns that major tech firms may now be locked in a high-stakes race to dominate artificial intelligence, potentially sacrificing profitability in the process.
This week’s earnings calendar is relatively light on major tech names, leaving retail giant Walmart to take centre stage. The company is forecasting annual sales growth of 4.8% to 5.1%, and investors will be watching closely as the retailer’s valuation has surged, with its P/E ratio around 47.
Walmart is also increasingly leaning on AI-driven systems, particularly in logistics, robotics, digital advertising, and online sales. The company hopes AI can improve demand forecasting — predicting what customers will buy and what they won’t — a shift that could significantly improve inventory efficiency.