Japanese authorities on Monday intensified their warnings over renewed yen weakness, saying they were prepared to take “appropriate” action against excessive and speculative foreign exchange moves, a stance that has once again put market intervention firmly in focus.

Atsushi Mimura, Japan’s top currency diplomat, said recent movements in the yen had been “one-sided and sharp,” language that Japanese officials have historically used ahead of direct intervention.

“The recent foreign exchange moves were one-sided and sharp, and I’m concerned about them,” Mimura told reporters. “We’ll take appropriate actions against excessive moves.”

Chief Cabinet Secretary Minoru Kihara reinforced that message, stressing that currency markets should move in a stable way that reflects economic fundamentals.

“The government will take appropriate measures against excessive movements, including speculative ones,” Kihara said, adding that authorities were watching developments closely.

The renewed warnings come as Japan continues to struggle to stabilize its economy after years of volatility that have weighed heavily on the yen. The country has faced a difficult mix of weak domestic demand, rising import costs, stubbornly low productivity growth, and repeated external shocks, leaving policymakers with limited room to maneuver. These pressures have made the currency particularly sensitive to global interest-rate shifts and investor sentiment.

Although the Bank of Japan last week raised its policy rate to 0.75% from 0.5%, taking borrowing costs to their highest level in roughly three decades, the move did little to support the yen. Instead, the dollar rose to as high as 157.67 yen on Friday, its strongest level in four weeks, as markets focused on Governor Kazuo Ueda’s cautious tone and the lack of clear guidance on when the next rate increase might come.

That reaction underscored a central challenge for Japan. While the BOJ has begun a slow exit from ultra-loose monetary policy, interest rates remain far below those in the United States, where the Federal Reserve has kept borrowing costs elevated. The resulting rate differential continues to encourage capital outflows and put downward pressure on the yen.

The currency’s weakness carries real economic and political consequences for the government. A softer yen pushes up the cost of imports such as energy, food, and industrial raw materials, squeezing households already grappling with higher living expenses. While exporters benefit from a weaker currency, officials have repeatedly warned that sharp or disorderly moves risk undermining economic stability and public confidence.

Kihara said the government would “closely monitor the impact of higher interest rates while cooperating with the Bank of Japan,” highlighting the need to balance currency stability with the risk that tighter policy could further slow growth. Japan’s recovery has been uneven, and officials remain wary of tightening financial conditions too aggressively at a time when consumption and investment are still fragile.

Bond markets reflected the tension on Monday. Japanese government bonds weakened further following last week’s rate hike, with the two-year yield, the most sensitive to monetary policy, climbing to a record high, and the 10-year yield hitting its highest level in 26 years. Rising yields suggest investors are reassessing Japan’s long-standing low-rate environment, even as uncertainty remains over the pace of future policy tightening.

Japan has intervened directly in currency markets in the past when yen declines became too rapid, most notably in 2022. While officials typically stop short of confirming any immediate plans, repeated references to “excessive” and “speculative” moves are widely interpreted by markets as a warning signal.

With the yen again under pressure, global rates still high, and Japan’s economic recovery fragile, investors are watching closely to see whether the government’s verbal warnings will translate into concrete action to stem further currency volatility.

China’s central bank, the People’s Bank of China (PBOC), opted to keep its benchmark lending rates unchanged for a seventh consecutive month on Monday, maintaining the one-year Loan Prime Rate (LPR) at 3.00% and the five-year LPR at 3.50%, in line with unanimous expectations from a Reuters poll of 25 market analysts conducted last week.

This decision, the longest streak of stability since the LPR system’s inception in 2019, underlines a cautious monetary policy stance aimed at balancing growth support with financial stability, even as recent data highlights softening domestic demand and persistent property sector woes. The one-year LPR serves as the primary reference for most new corporate and household loans, while the five-year rate heavily influences mortgage pricing—a critical lever in addressing the ongoing real estate slump.

Despite the hold, effective lending rates for new loans have continued to trend lower, hovering at historic lows due to prior PBOC guidance and targeted relending facilities, with average corporate loan rates dipping to around 3.5% in Q3 2025.

The last adjustments occurred in May 2025, when both rates were trimmed by 10 basis points amid efforts to revive post-pandemic recovery.

November’s economic indicators painted a mixed picture, prompting calls for more stimulus but not immediate action. Industrial output expanded by 4.8% year-on-year, a slight deceleration from October’s 4.9% and below the 5.0% consensus forecast, reflecting weaker manufacturing amid subdued external demand.

Retail sales growth slowed sharply to 1.3% from 2.9%, the weakest since August 2024, hampered by cautious consumer spending and a lingering property crisis that has eroded household wealth.

Fixed-asset investment for January-November rose 3.3% year-on-year, steady but underscoring infrastructure’s role in propping up activity.

Property investment plunged 10.4% in the first 11 months, with new home prices falling at the fastest pace in over a decade, exacerbating deflationary pressures.

New bank loans totaled 1.09 trillion yuan ($150 billion), missing estimates due to tepid household borrowing, while the urban unemployment rate edged up to 5.1%.

Inflation remained subdued, with the Consumer Price Index (CPI) up 0.7% year-on-year, far below the 3% target.

Despite these headwinds, the economy appears on track to achieve Beijing’s “around 5%” growth target for 2025, bolstered by a record $1.08 trillion trade surplus through November—up 8.7% year-on-year—and resilient exports, which surged 12.4% in November amid front-loading ahead of potential tariffs.

Q3 GDP came in at 4.6%, with full-year projections from institutions like the World Bank and IMF revised upward to 4.8-5.0%, citing easing U.S.-China trade tensions following a November interim agreement suspending certain duties.

The PBOC’s “cross-cyclical” adjustments—focusing on long-term stability—and banks’ record-low net interest margins (around 1.5%) afford policymakers flexibility to delay broad easing, prioritizing targeted measures like the September 50-basis-point reserve requirement ratio (RRR) cut and a November reduction in the medium-term lending facility (MLF) rate to 2.0%.

The announcement echoed signals from the annual Central Economic Work Conference (CEWC) held December 8-10, where top leaders, including President Xi Jinping, pledged a shift to a “moderately loose” monetary policy for 2026—marking the first such designation since 2010—and a “more proactive” fiscal stance to boost consumption, investment, and innovation.

The conference outlined nine key priorities: stimulating domestic demand through wage hikes and social security enhancements; advancing technological self-reliance in sectors like AI and quantum computing; deepening reforms in state-owned enterprises; stabilizing the property market via affordable housing initiatives; and managing risks in local government debt, estimated at $13 trillion.

Officials hailed 2025’s “remarkable” resilience amid external shocks but acknowledged challenges like weak consumption and overcapacity, committing to a 5% GDP target for 2026 while emphasizing “high-quality development.”

Analysts broadly interpret the hold as a sign of strategic patience rather than complacency. Barclays economists highlighted the CEWC’s call for “flexible and efficient” use of tools like RRR and interest rates, forecasting a 10-basis-point policy rate cut and 50bp RRR reduction in Q1 2026 to facilitate bond issuance.

Nomura anticipates a similar easing in Q2 2026, emphasizing fiscal ramps to arrest slowdowns.

Goldman Sachs and JPMorgan echo this, projecting cumulative 20-30bp LPR cuts in 2026 if property drags persist, while Pantheon Macroeconomics notes reduced trade risks post-U.S. deal could ease external pressures.

Zichun Huang of Capital Economics attributed November’s weakness to fiscal pullbacks, urging bolder reforms.

Market responses were subdued, reflecting pre-priced expectations. The Shanghai Composite Index rose 0.36% to close at 3,890.45 points, with gains in consumer and tech stocks offsetting property declines.

The onshore yuan held steady around 7.12 per U.S. dollar, supported by PBOC midpoint guidance, while 10-year government bond yields dipped slightly to 1.95%.

As China transitions into 2026, the PBOC’s hold buys time for fiscal tools, potentially including a larger deficit and special bonds, to take center stage, but persistent deflation and external uncertainties could force earlier intervention. With global peers like the Federal Reserve pausing hikes, Beijing’s calibrated approach aims to foster sustainable growth without reigniting debt risks, setting the stage for a pivotal year ahead.

China’s leading offshore oil producer, CNOOC Ltd, has brought a new offshore oil development into production in the South China Sea, adding incremental supply as Beijing steps up efforts to strengthen domestic crude output and reduce reliance on imports.

The company said on Monday that the Xijiang Oilfields 24 Block Development Project, located in the shallow waters of the Pearl River Mouth Basin, has commenced production. At peak levels, the field is expected to produce about 18,000 barrels of light crude oil equivalent per day by 2026.

CNOOC said the project was developed by tying into existing infrastructure at the neighboring Huixi Oilfields, with the installation of a new unmanned wellhead platform. The development plan includes 10 development wells, which will feed into nearby processing facilities. The company holds a 100% interest in the project and is its operator.

The Pearl River Mouth Basin is one of China’s most established offshore producing areas, and projects like Xijiang 24 illustrate how CNOOC is squeezing additional output from mature basins through smaller, faster-to-market developments. By relying on adjacent infrastructure rather than building a standalone production hub, the company is reducing costs and shortening development timelines, an approach it has increasingly adopted across its offshore portfolio.

While the projected output from Xijiang 24 is modest by global standards, the project fits into a much larger strategic picture. China is the world’s largest crude oil importer, and its buying patterns have a major influence on global oil flows and pricing. Any sustained success in boosting domestic production would, over time, reshape demand dynamics in the international oil market.

Beijing has repeatedly called on state-owned oil companies to raise domestic output, citing energy security concerns amid geopolitical tensions and supply disruptions. Offshore developments in the South China Sea and Bohai Bay have therefore become central to this strategy, as onshore production growth has been harder to achieve.

If China were to make meaningful progress toward meeting a larger share of its crude needs locally, the implications would extend well beyond its borders. As one of the biggest buyers of crude oil globally, China has played a critical role in absorbing barrels from sanctioned producers, particularly Russia and Venezuela, at times when access to Western markets has been constrained by U.S. sanctions.

Since the tightening of sanctions on Moscow following the Ukraine war, China has emerged as one of Russia’s most important crude customers, alongside India. Similarly, Chinese refiners have been a key outlet for Venezuelan oil, providing Caracas with a vital export channel after U.S. measures sharply restricted its ability to sell crude openly on global markets.

A sustained reduction in China’s import demand, driven by higher domestic output, would therefore pose a structural risk to these suppliers. Russia and Venezuela, already operating with limited market access, could face greater competition to place their crude, potentially at steeper discounts, if China’s appetite for imported barrels eases.

For now, China remains heavily dependent on imports, and projects like Xijiang 24 will not materially alter that balance on their own. However, taken together with dozens of similar offshore developments, they signal a long-term policy direction. Incremental gains across multiple projects could gradually chip away at import dependence, particularly for light and medium grades that are well suited to China’s refining system.

CNOOC’s focus on unmanned platforms, digital monitoring, and infrastructure-led developments also suggests that future offshore projects could be brought on stream more quickly and with lower operating costs, improving the economics of domestic production.