3 Things You Need to Know This Week | Central Banks, US Jobs, Japan Gov. Bond Yields

Transcript

Meg Leiken:

Hello, and welcome to 3 Things You Need to Know This Week. Our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com And with that, here are three things you need to know this week.

First, upcoming central bank meetings.

 Last week, the Fed reduced its policy rate by a quarter of a percent. This week, investors are watching to see what several other central banks around the world will be doing with their key interest rates, with the Bank of Japan, the European Central Bank and the Bank of England all set to make policy announcements. Starting in Europe, the European Central Bank is widely expected to hold rates steady. Meanwhile, the Bank of England is less predictable. In November, a split committee kept rates steady at 4%, but stubborn services inflation could encourage the Bank of England to delay further cuts despite a cooling labor market. On the other hand, the Bank of Japan is expected to hike rates at its December meeting. With inflation tracking toward their 2% target and wage growth accelerating, it appears ready to raise its benchmark rate to 0.75%. This potential move to hike rates would distinguish Japan from its Western counterparts. Some may question how the Fed's decision and predictions last week may influence other central banks this week. But historically, central banks around the world have acted independently of one another, and any divergence in policy may matter less than the global yield curves trajectory, which has steepened this past year. A steepening yield curve is often an indicator for economic growth and banking profitability, and to us, this should provide a continued positive backdrop for stocks.

Next, US labor data.

This week we'll get a fresh look at US job market data, as nonfarm payrolls data for October and November are released. Due to the recent government shutdown, the US Bureau of Labor statistics will combine nonfarm payrolls for these months. September's data showed, the US economy added nearly 120,000 jobs, more than double the forecast of 50,000. This was the largest job increase in five months, driven largely by gains in health care and hospitality. Now, it's important to note that certain industries are cutting back, and we sympathize with those who have been affected by job cuts. But overall, September's data suggests the broader economy is expanding as employers in Services sectors add more jobs on net than are being cut elsewhere. When it comes to jobs data, we think it's important to contextualize this information. Payroll data is inherently backward looking, and due to the shutdown delays, this upcoming report will be more outdated than usual. If the economy were truly in a freefall, we'd likely see broader weaknesses across all sectors. Ultimately, while soft spots remain, the labor market continues to show resilience, offering long-term investors a reminder that the broader economy is still finding ways to grow and adapt.

Finally, rising Japanese government bond yields.

Japanese government bond yields have risen to nearly 2%, a 19 year high doubling from 1.1% at the start of 2025. This increase has raised concerns about global market stability, with critics pointing to Japan's debt-to-GDP ratio exceeding 200%. However, as we shared in a recent MarketMinder article, debt-to-GDP isn't the most reliable measure of financial health. A more accurate indicator is Japan's debt-service ratio; how much of its tax revenue is allocated toward interest payments, which remains historically low. This stability is why Japanese government bond investors continue to view Japan's creditworthiness as highly dependable, with yields among the lowest in the developed world. While the headlines may amplify concerns, the underlying data tells a different story. For long-term investors, rising Japanese government bond yields could actually signal economic progress. Higher yields steepen the yield curve encouraging bank lending. In November, Japanese bank loans grew 4.5% year-over-year, the fastest pace in 25 years, outside the pandemic related surges. This credit expansion supports economic activity, driving both consumption and investment. Meanwhile, Japanese and global stocks have risen in tandem with these yields. Rather than cause for alarm, rising yields reflect normalization and present opportunities for investors with a long-term perspective.

And that's it for this episode of 3 Things You Need to Know this Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com. Thanks for tuning in and don't forget to hit 'Like' and 'Subscribe!'