German business confidence unexpectedly declined in September 2025, with the Ifo expectations index dropping to 89.7, reflecting skepticism about Chancellor Friedrich Merz’s economic recovery plans, as borrowed funds were directed more toward consumption than modernization. The manufacturing sector faces challenges from external pressures like U.S. tariffs on EU goods, while structural issues such as pension reform and bureaucracy remain unaddressed, dimming hopes for a robust recovery. Meanwhile, German consumer confidence is expected to slightly improve to -23.3 in October but remains low due to concerns over the economy, job security, and inflation. The European Central Bank is advancing plans for a digital euro by 2029 to enhance payment sovereignty, though legislative hurdles and member-state agreements are still needed.

Sanae Takaichi, a key contender in Japan’s LDP leadership race, has softened her previously dovish stance on monetary policy, emphasizing that while the government sets broad economic goals, the Bank of Japan should independently determine policy details. She cautions against rapid rate hikes due to potential harm to corporate investment but acknowledges Japan’s stable bond market, driven by strong domestic ownership. Despite her shift, analysts expect the BOJ to proceed with rate hikes as early as October, supported by persistent inflation above the 2% target and solid wage growth, with upcoming Tokyo CPI data likely to reinforce this outlook. Meanwhile, Japan’s Finance Ministry will cut super-long bond issuance to ease market pressure, a move seen as slightly positive for bond market stability and the yen, though broader fiscal credibility remains a concern amid political uncertainty.

RBA Governor Michele Bullock indicated that Australia’s economy is performing as expected or slightly better, with inflation within the 2–3% target and unemployment near full employment. The RBA remains focused on controlling inflation, leading to a cautious market outlook, though a November rate cut is still anticipated. A recent “productive” Xi-Trump call has improved US-China relations, potentially boosting high-beta currencies like the Australian dollar if tensions continue to ease. Despite a 2.7% decline in job vacancies and a net job loss in August, the RBA is likely to maintain a balanced approach, with economists expecting only a modest 50 basis point rate cut due to limited labor market slack.