Japan’s Consumer Confidence Index (CCI) climbed to 37.50 in December 2025, surpassing the consensus estimate of 35.90 and the prior month’s 35.80 reading, according to the Sigmanomics database. This marks the highest confidence level since January 2025 (35.20) and signals a meaningful rebound from the mid-year trough of 31.20 in May.

Drivers this month

• Improved labor market conditions with unemployment steady near 2.50%
• Moderate inflation easing cost-of-living concerns
• Stronger retail sales and durable goods orders in Q4

Policy pulse

The Bank of Japan (BoJ) maintains its ultra-loose monetary stance, with short-term rates near zero and yield curve control intact. Inflation remains below the 2% target, allowing accommodative policy to support consumption. Fiscal stimulus remains limited due to budget constraints but targeted subsidies aid household spending.

Market lens

Immediate reaction: USD/JPY declined 0.30% in the first hour post-release, reflecting yen strength amid improved sentiment. Japanese equities (Nikkei 225) gained 0.50%, while 2-year JGB yields held steady near 0.10%.

Consumer confidence is a key barometer of household willingness to spend, influencing GDP growth and inflation dynamics. The current 37.50 reading is well above the 12-month average of 34.10, indicating a sustained recovery in sentiment since the mid-2025 dip.

Historical comparisons

• December 2025 (37.50) vs. May 2025 low (31.20): 6.30 points, signaling a strong rebound
• December 2025 vs. December 2024 (approx. 33.00): 4.50 points, showing year-on-year improvement
• Peak in early 2024 was 38.70, indicating current levels are near multi-year highs

Monetary policy & financial conditions

The BoJ’s dovish stance continues to underpin consumer credit availability and low borrowing costs. Inflation running near 1.20% YoY remains below target, limiting pressure for tightening. Financial conditions are accommodative, supporting household balance sheets despite global uncertainties.

Fiscal policy & government budget

Japan’s government maintains a cautious fiscal approach amid high public debt (~260% of GDP). Recent stimulus packages focus on targeted support for energy costs and digital transformation, indirectly boosting consumer confidence by stabilizing disposable income.

Market lens

Immediate reaction: The Japanese yen strengthened modestly against the USD, with USD/JPY dropping 0.30% within the first hour. Equity markets responded positively, reflecting investor confidence in domestic consumption growth.

Looking ahead, consumer confidence in Japan faces a mix of supportive and challenging factors. The BoJ’s accommodative policy and stable inflation underpin a bullish scenario, while global geopolitical tensions and fiscal constraints pose downside risks.

Scenario analysis

• Bullish (30% probability): Confidence rises above 40 by mid-2026, driven by sustained wage growth and easing energy prices, fueling stronger consumption and GDP growth above 2%.
• Base (50% probability): Confidence remains in the 37–39 range, supporting moderate consumption growth of around 1.50%, with inflation steady near 1.50% and no major policy shifts.
• Bearish (20% probability): External shocks (e.g., supply chain disruptions, geopolitical tensions) depress confidence below 35, slowing consumption and risking deflationary pressures.

Structural & long-run trends

Japan’s aging population and slow productivity growth remain structural headwinds. However, digitalization and green investment initiatives may gradually enhance consumer sentiment and spending power over the medium term.

Japan’s December 2025 Consumer Confidence reading of 37.50 marks a notable improvement, reflecting a cautiously optimistic consumer base. While monetary policy remains supportive and inflation contained, external risks and fiscal limits require vigilance. The data supports a moderate growth outlook for 2026, with consumer spending likely to remain a key driver.

Investors and policymakers should monitor upcoming inflation prints, wage data, and geopolitical developments closely to gauge the sustainability of this confidence rebound.

Insight: Consumer Confidence vs. Nikkei 225 Since 2020

Since 2020, Japan’s Consumer Confidence Index and the Nikkei 225 have shown a positive correlation of approximately 0.65. Periods of rising confidence, such as post-pandemic recovery in 2021 and late 2025, coincide with notable equity rallies. This relationship underscores how consumer sentiment drives domestic demand expectations, influencing corporate earnings and stock valuations.

FAQs

What is the significance of Japan’s Consumer Confidence Index?

The Consumer Confidence Index measures household sentiment on economic conditions, influencing spending and growth forecasts.

How does the Consumer Confidence reading affect monetary policy in Japan?

Higher confidence can signal stronger demand, potentially prompting the BoJ to adjust its accommodative stance if inflation rises.

What are the main risks to Japan’s consumer confidence outlook?

Risks include geopolitical tensions, supply chain disruptions, and fiscal constraints limiting stimulus capacity.

Japan’s December 2025 Consumer Confidence rebound to 37.50 signals renewed household optimism, supporting a moderate growth path amid cautious policy and external uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Updated 12/2/25