Thin Lunar New Year trade and softer US inflation shape a cautious start to the week, while Tokyo’s slowdown tests Prime Minister Sanae Takaichi’s economic promises…..
Asian equities began the week on a muted note, with several major bourses shuttered for the extended Lunar New Year holiday and fresh economic data from Japan dampening investor enthusiasm.
Markets in Shanghai, Seoul and Taipei remained closed, while Hong Kong and Singapore ended the day after half sessions. With US exchanges also shut for Presidents’ Day, trading volumes were thin and conviction light across the region.
The bigger story, however, came out of Tokyo.
Japan’s economy grew by just 0.1 percent in the final quarter of 2025 sharply below expectations of 0.4 percent, underscoring the fragility of the recovery and casting a shadow over the early days of Prime Minister Sanae Takaichi’s new mandate.
Takaichi, who swept to a landslide victory in the February 8 snap election on a pledge to reignite growth, now faces mounting pressure to turn rhetoric into results. The latest figures suggest that a hefty supplementary budget approved late last year has yet to filter through to the real economy.
Marcel Thieliant of Capital Economics said the data implies public spending has not received the anticipated boost. The weakness, he added, raises the likelihood that the government will move quickly to suspend the sales tax on food and possibly roll out another supplementary budget in the first half of the new fiscal year beginning in April rather than waiting until later in 2026.
Tokyo’s benchmark Nikkei 225 slipped 0.2 percent by the close. In Hong Kong, the Hang Seng Index managed a 0.5 percent gain before early trading wrapped up. Elsewhere, Wellington, Jakarta, Manila and Kuala Lumpur edged lower, while Sydney, Mumbai and Bangkok posted modest gains. Singapore was largely flat.
Despite the cautious tone, markets showed tentative signs of stabilisation following last week’s sharp, tech-led sell-off. Investors had recoiled amid growing unease over the vast sums being poured into artificial intelligence infrastructure and lingering doubts over how quickly those investments will translate into meaningful returns.
Artificial intelligence will remain squarely in focus this week as the five-day AI Impact Summit opens in New Delhi. The event is set to draw heavyweight industry leaders including OpenAI chief Sam Altman and Google CEO Sundar Pichai.
While generative AI has supercharged earnings and market valuations across the technology sector, investor anxiety is rising over regulatory risks, environmental costs and broader societal implications. The summit is expected to spotlight not just innovation, but accountability.
In the United States, a softer-than-expected inflation reading for January provided a measure of relief at the end of last week. The data strengthened expectations that the Federal Reserve could resume cutting interest rates later this year though analysts caution that policymakers will want to see a sustained cooling trend before making any decisive moves.
“US inflation data was good, and the initial response in equities reflected that,” said Kyle Rodda of Capital.com. “But the devil was in the details.” He noted that both headline and core inflation eased, with core inflation falling to its lowest level since March 2021 at 2.4 percent.
In commodities, gold slipped back below the $5,000-an-ounce mark after rallying on the inflation news, while silver fell about one percent. Oil prices were steady, with West Texas Intermediate holding near $62.91 a barrel and Brent crude around $67.75.
With key Asian markets closed, Wall Street on pause and AI optimism facing tougher scrutiny, investors appear content for now to tread carefully. But as Japan weighs fresh stimulus, the Fed debates its next move and the tech sector defends its AI bets, the calm may prove short-lived.
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