Asia's Economic Divide: China Slows, Japan Stabilizes Amid Global Uncertainty

• China's services activity slowed to a six-month low in December (PMI 52.0), with new business and export growth contracting, despite improved business sentiment for 2026.
• China faces fragile recovery due to property downturn, deflation, and shrinking employment, prompting Beijing to pledge proactive fiscal measures for 2026.
• Japan's manufacturing sector stabilized in December (PMI 50.0), ending a five-month contraction, with easing decline in new orders and improved sales in some areas.
• Japanese manufacturers added staff for the 13th month, but face accelerating input costs and tighter monetary conditions from the Bank of Japan's recent interest rate hike.
• Asia enters 2026 with uneven economic momentum: China's services cooling, while Japan's factories find a floor but confront rising costs and policy headwinds.

Why It Matters: Asia's major economies face an uneven 2026, with China's services cooling and Japan's manufacturing stabilizing amidst rising costs.