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Industrial production decreased by 0.1% quarter-on-quarter in the third quarter, primarily due to reductions in output related to US tariffs. Transportation equipment and iron/steel output declined in September, likely due to the lingering effects of US tariffs. Still, the recent easing of tariff tensions in several countries should support Japan’s production rebound in the coming months. Semiconductor equipment sales rose for a second consecutive month, suggesting that strong global chip demand continued. Meanwhile, retail sales rebounded 0.3% MoM in September, but missed the market consensus of 0.8%.

Both IP and retail sales fell in Q3, indicating a GDP contraction for 3Q25. However, a rebound in September points to a gradual economic recovery in the current quarter.

The BoJ cited trade uncertainty as the reason for pausing rate hikes yesterday. However, today’s data indicates a possible economic recovery that could support future rate hikes.

Today’s data supports our view that the BoJ is likely to hike rates in December.

Following yesterday’s regional GDP data, today brings the release of Poland’s October inflation figures, as always, the first inflation print from the CEE region. Our economists expect a slight increase from 2.9% to 3.0% YoY, in line with market expectations, while core inflation should remain unchanged at 3.2% YoY. Today’s figure could decide whether the National Bank of Poland cuts rates again next week. We believe that it will take a break, but a surprise to the downside could push the decision back towards a rate cut.

Yesterday’s GDP data in the Czech Republic and Hungary confirmed our bias and more divergence in economic performance in the region. While the Czech GDP surprised up, with a growth of 2.7% YoY, the Hungarian economy surprised down by 0.6% YoY, both roughly in line with our expectations. Although the market impact was almost invisible given the strong global story, in the longer term, this is clearly a story worth following.

Next week, we will see the meeting of the Czech National Bank, which will also publish a new forecast. Although headline inflation may give the impression that the central bank may be relaxed and may return to rate cuts one day, the economic data shows that the CNB needs to be cautious as we look ahead. The economy is growing at its fastest pace since the Covid rebound, and at the same time, wages are showing upside, which will keep core inflation higher. On the other hand, the Hungarian economy has confirmed its weak performance, and we believe that the market will push more dovish bets even though the NBH remains hawkish. This should gradually start to undermine the HUF in the medium term.

For now, the strong rate reaction in the CEE region to Wednesday’s hawkish Fed should offset the impact of a stronger US dollar, and we expect EUR/HUF and EUR/CZK to stabilise at current levels, while PLN will follow inflation figures.

Chris Turner