U.S. approves $10bn+ arms sales to Taiwan
The Trump administration has approved a sweeping package of arms sales to Taiwan valued at more than $10 billion, sharply escalating military support for the island and injecting fresh tension into already strained U.S.–China relations.
The U.S. State Department announced the sales late Wednesday, coinciding with a nationally televised address by President Donald Trump, although the president did not reference China or Taiwan in his remarks. The package comprises eight separate agreements and represents one of the largest single tranches of U.S. military assistance approved for Taiwan.
At the core of the deal are 82 High Mobility Artillery Rocket Systems (HIMARS) and 420 Army Tactical Missile Systems (ATACMS), together valued at more than $4 billion. The systems mirror weaponry supplied by Washington to Ukraine during its conflict with Russia and are designed to enhance Taiwan’s long-range strike and deterrence capabilities. The package also includes around $4 billion worth of self-propelled howitzer systems and associated equipment, along with drones valued at more than $1 billion.
The announcement is likely to provoke a sharp response from Beijing, which considers Taiwan a breakaway province and has consistently opposed U.S. arms sales to the island. Such moves are typically met with diplomatic protests, military signalling and, at times, retaliatory measures targeting U.S. interests or companies.
Markets in China appeared to anticipate heightened regional tensions. China’s CSI Defence Index rose more than 2% to a two-month high following news of the approvals, reflecting investor expectations of increased domestic defence spending and procurement in response to rising geopolitical risks.
For Washington, the package reinforces a strategy of bolstering Taiwan’s defensive capabilities without formally altering long-standing policy frameworks. For Taiwan, the systems enhance deterrence but also raise the stakes in cross-strait relations at a time of elevated military activity in the region.
While the arms sales are unlikely to trigger immediate market dislocation beyond the defence sector, they add to a broader backdrop of strategic rivalry that continues to shape regional security, trade flows and investor sentiment across Asia.
This article was written by Eamonn Sheridan at investinglive.com.
Japan signals increased vigilance on FX moves
Japan’s top government spokesman has stepped up verbal warnings on market conditions, signalling heightened official sensitivity to yen moves and rising long-term interest rates as authorities seek to lean against renewed currency weakness.
Chief Cabinet Secretary Minoru Kihara said the government is closely watching market developments, including movements in long-term rates, comments that were widely interpreted as a warning to currency markets. While Kihara did not refer directly to the yen, the emphasis on monitoring financial conditions underscores concern that recent depreciation risks becoming destabilising.
The remarks come as the yen remains under pressure amid persistent yield differentials between Japan and other major economies, even as expectations grow that the Bank of Japan will continue to normalise policy gradually. With markets already pricing a December rate hike, officials appear keen to avoid excessive or disorderly yen moves that could undermine confidence or complicate policy messaging.
Verbal intervention remains a preferred first line of defence for Japanese authorities. By signalling vigilance without committing to concrete action, officials can temper speculative positioning and reinforce two-way risk in the currency without triggering volatility associated with direct intervention. There is also broader concern about tightening financial conditions, particularly given the sensitivity of Japan’s highly indebted economy to higher borrowing costs.
The government has repeatedly stressed that it does not target specific exchange-rate levels, but rather seeks to prevent sharp, one-sided moves driven by speculation. Kihara’s comments are consistent with that stance, reinforcing the message that authorities stand ready to respond if market behaviour becomes excessive.
For markets, the signalling suggests a desire to stabilise the yen and perhaps even engineer a reversal (good luck with that!). With the Bank of Japan expected to proceed cautiously on further tightening, officials appear focused on buying time and containing volatility rather than forcing a rapid currency adjustment.
The comments underline Japan’s coordinated approach to currency management, with fiscal authorities setting the tone through verbal guidance while the central bank maintains flexibility over the pace of policy normalisation.
This article was written by Eamonn Sheridan at investinglive.com.
Trump announces “warrior dividend” for service members:
Likely short-term boost to consumption
U.S. President Donald Trump said more than one million (I think the number is around 1.4mn) U.S. service members will receive a special one-off payment before Christmas, announcing what he described as a “warrior dividend” worth $1,776 per person.
Speaking at a campaign event, Trump said the payment would be made to every active-duty service member, framing the move as both recognition of military service and direct financial support. The amount, a reference to the year of American independence, was presented as symbolic as well as practical, delivering cash support ahead of the holiday period.
While details around funding and implementation were not immediately provided, the proposal carries clear fiscal and economic implications. A payment of this scale would amount to a stimulus injection of roughly $1.8 billion into household incomes, concentrated among a group with a high propensity to spend. Delivered before year-end, the payments would likely provide a short-term boost to consumer spending, particularly in retail and services sectors tied to holiday demand.
The announcement also fits within a broader pattern of using targeted fiscal transfers as an economic and political tool. Direct payments have proven effective in quickly supporting consumption, even when modest in size, and can help cushion households against cost-of-living pressures without requiring broader structural policy changes.
From a policy perspective, the proposal may raise questions about fiscal discipline and precedent, particularly if similar payments are extended to other groups. However, supporters may argue that the targeted nature of the dividend limits its inflationary impact compared with broader stimulus measures, while reinforcing support for military personnel.
Markets are unlikely to view the proposal as macro-significant in isolation, given its relatively small scale relative to the U.S. economy. Nonetheless, it adds to the broader narrative of renewed fiscal activism and the willingness of policymakers to deploy direct cash transfers as both an economic lever and a political signal.
Further clarity on timing, funding mechanisms and legislative backing will be required before the proposal can be fully assessed.
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Trump has added more, promising to announce the next chair of the Federal Reserve ‘soon’. Trump says the new Fed Chair will believe in lower interest rates ‘by a lot’. Bad grammar, but a clear message of what Trump wants regardless.
This article was written by Eamonn Sheridan at investinglive.com.
Honda to suspend production in Japan and China
Honda Motor Co. is set to suspend vehicle production across parts of Japan and China in the coming weeks, underscoring continued fragility in global automotive supply chains and raising fresh questions about demand conditions in key markets.
The Japanese automaker said it will halt output at domestic plants on January 5 and 6, while production at all three Guangqi Honda joint-venture facilities in China will be suspended from December 29 through January 2. Honda cited ongoing semiconductor shortages as the primary reason for the stoppages, a reminder that chip supply disruptions continue to weigh on manufacturing schedules despite earlier signs of improvement.
The move comes as a setback after Honda had indicated production was expected to normalise from late November. Instead, the latest suspensions suggest that supply constraints remain unresolved, complicating efforts to restore output volumes and stabilise inventories.
However, the interruptions may also prompt scrutiny of underlying demand conditions. Auto demand in parts of Asia has softened amid higher borrowing costs, cautious consumer spending and uneven economic momentum. In that context, temporary production halts can serve a dual purpose, helping manufacturers manage inventories and align output more closely with sales trends. While Honda has not explicitly pointed to weaker demand, the overlap between lingering supply issues and a more challenging demand backdrop suggests the stoppages may reflect a broader recalibration rather than purely logistical disruption.
The announcement weighed on investor sentiment, with Honda shares falling around 1.5% in Tokyo trading following media reports. The market reaction reflects concern that prolonged supply constraints — combined with softer demand — could continue to cap earnings momentum into the new year.
China remains a critical market for Honda, both in terms of sales volumes and manufacturing scale, making the suspension of its joint-venture plants particularly notable. More broadly, the episode highlights how global automakers remain exposed to both supply-side bottlenecks and cyclical demand risks, even as the industry adapts by prioritising higher-margin models and adjusting production mixes.
I’m just gonna stick to their bikes 😉
This article was written by Eamonn Sheridan at investinglive.com.
The People’s Bank of China’s decision to issue 40 billion yuan of 182-day central bank bills in Hong Kong on December 22 should be viewed as part of a broader effort to manage the pace of recent CNY strength.
Unlike earlier episodes where offshore bill issuance was used to counter depreciation pressure, the yuan is currently on a firm footing. The PBoC has been consistently setting the daily USD/CNY fixing higher than market models imply (i.e. weaker for CNY), a clear signal that authorities are seeking to slow the currency’s ascent rather than resist downside risks. Against that backdrop, the Hong Kong bill issuance appears designed to fine-tune offshore liquidity conditions and less so about dampening one-way appreciation dynamics.
The choice of a 182-day tenor is telling. A longer maturity allows the PBoC to lock in conditions through the first half of next year, smoothing funding dynamics across the year-end and early-2026 period.
The bank added liquidity today for 14 days, spanning the period to January 1. I suspect they’ll do more of this in the days ahead:
It reinforces the message that authorities prefer gradual, sustained calibration rather than reactive short-term operations.
Importantly, the move does not signal a shift toward broader monetary tightening. Onshore liquidity is still managed separately through reverse repos and medium-term facilities, and domestic policy remains focused on supporting growth while safeguarding financial stability. The offshore bill programme instead reflects China’s preference for targeted tools that address specific market imbalances.
For markets, the takeaway is that the PBoC is actively managing both sides of currency risk. While it remains unwilling to tolerate disorderly weakness, it is equally cautious about excessive or rapid appreciation that could undermine export competitiveness and financial conditions. The Hong Kong bill issuance, combined with carefully calibrated fixings, underscores a clear policy objective: stability over direction.
This article was written by Eamonn Sheridan at investinglive.com.
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