An inflation gauge in Japan that is closely watched by the Bank of Japan (BOJ) came in at a seven-month high in November, which could prompt the central bank to raise rates early next year.

The so-called “core-core” inflation rate, which strips out prices of both fresh food and energy and is tracked by the BOJ, rose to 2.4% from 2.3%, its highest level since April.

The core inflation rate — which strips out prices of fresh food — came in at 2.7%, up from the 2.3% seen in October and beating the 2.6% forecast by economists polled by Reuters.

Headline inflation rose to 2.9% from 2.3%, reaching its highest level since August.

The readings come a day after the Bank of Japan held interest rates steady at 0.25%, surprising economists who expected a 25 basis points hike.

The BOJ said in its statement on Thursday that the decision to hold was a split 8-1 decision, with board member Naoki Tamura advocating for a 25-basis-point hike.

Tamura was of the view that inflation risks had become more skewed to the upside, and proposed that the bank hike interest rates during the meeting.

BOJ Governor Kazuo Ueda reportedly said in a press conference Thursday that as underlying inflation was only increasing at “at a moderate pace,” the BOJ could go slow in raising rates,” he said.

Ueda did add, however, that the central bank was mindful that if it waited too long to raise rates, it would have to quicken rate hikes in future meetings,

Speaking to CNBC’s “Squawk Box Asia,” Masahiko Loo, senior fixed income strategist at State Street Global Advisors, said that the inflation print is “pretty much in line with what we think.”

He added that the BOJ is “super sanguine” on the country’s inflation and growth figures, but Ueda was likely focusing on foreign uncertainties, namely, the impact of the incoming Donald Trump administration.

The yen weakened against the U.S. dollar following the BOJ’s decision to hold rates. It hit 157.92 on Friday, marking its weakest level since July. However, the currency later strengthened again.

Loo explained that with the yen now “drifting” toward the 160 level against the greenback, Japan’s finance ministry might try to issue warnings to the market, or failing that, it might force a rate hike in January in a bid to support the yen.

China kept its main benchmark lending rates unchanged on Friday, as Beijing faces the challenge of bolstering economic growth while backstopping a weakening yuan.

The People’s Bank of China said it would steady the one-year loan prime rate at 3.1%, with the five-year LPR at 3.6%. The 1-year LPR affects corporate and most household loans, while the 5-year LPR serves as a reference for mortgage rates. The move was expected according to a Reuters poll of 27 economists.

The rate decision came on the back of a widely-expected 25-basis-points rate cut by the U.S. Federal Reserve on Wednesday. The Fed also indicated it will only reduce interest rates twice in 2025, fewer than the four cuts in its September meeting’s projection.

Analysts said the Fed’s revised outlook on future rate cuts is unlikely to have a huge influence on the trajectory of policy easing by China’s central bank, although it could put pressure on the Chinese yuan.

It seems that the PBOC is not stepping in to defend the yuan, Farzin Azarm, managing director of equities trading at Mizuho Americas told CNBC’s “Street Signs Asia” on Friday.

“But really, what’s the point? … I think at this point, it really is a function of what rates are doing. I think it’s really a function of what the curve is doing in the U.S. And I think the central bank’s going to let it play out, to be perfectly honest with you,” said Azarm.

Earlier this month, Chinese top officials pledged at top economic agenda-setting meetings to ramp up monetary easing measures, including implementing interest rate reductions, to shore up the ailing economy.

The PBOC kept the one-year and five-year LPRs unchanged in November, following a widely-anticipated 25bp-cut in October. The central bank had surprised the markets by shaving the major short and long term lending rates in July.

Major investment banks and research firms forecast the Chinese yuan would weaken further next year, in anticipation of President-elect Donald Trump following through with his tariff threats.

Despite a flurry of stimulus measures since late September, latest economic data out of China showed the country is still contending with entrenched deflation, amid tepid consumer demand and a protracted property market slump.

The Fed’s easing cycle going forward will create “some room for the PBOC to follow up,” Yan Wang, chief emerging markets and China strategist at Alpine Macro told CNBC’s “Street Signs Asia” on Thursday, while stressing that fiscal easing will play a more critical role in driving the Chinese economy next year.

In a note to CNBC on Friday, Wang said he believed the PBOC should continue cutting rates to alleviate the yuan’s deflationary pressure against other currencies.

“Meanwhile, the Chinese government possesses greater fiscal flexibility and is likely to rely more on fiscal measures to stimulate growth,” he added.

— CNBC’s Dylan Butts contributed to this report.

This report is from this week’s CNBC’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe here.

The putrid burning smell, difficulty breathing and chest congestion – that is what Delhi resident Sheetal Sharma has been experiencing since end-October, no thanks to the toxic air enshrouding India’s National Capital Region (NCR).

“Delhi feels right out of a dystopian movie. The air quality deteriorated very quickly post-Diwali from poor to severe in a matter of hours and has continued that way till now,” Sharma told CNBC’s Inside India, alluding to the popular national festival.

The air quality index (AQI) – which measures the level of pollution in the air – has risen significantly in the last few months. The metric peaked in November and subsequently edged down, only to nudge up to around 478 in the National Capital Territory of Delhi, which alongside several districts from surrounding states makes up the NCR, on Thursday. The reading remains in the hazardous range per classifications from India’s Central Pollution Control Board.

The government body considers a good AQI reading to be between zero and 50. Readings between 200 and 400 are classified as “poor” or “very poor” while anything above 500 is deemed “severe” for it has a serious impact on people with existing ailments.

The high AQI readings have pushed the government to direct schools to move to hybrid mode for some grades and stagger the working hours of civil servants. It has also imposed restrictions on vehicle usage in Delhi and adjoining regions with the view to curb emissions.

Still, Delhi’s prolonged high AQI reading has already taken a toll on many of its denizens. Sharma recounts that she had “no respite,” despite several courses of medication and undergoing treatment to clear her nasal passageways.

Relief only came when she “escaped” to a village near Nainital, some 300 kilometers away from Delhi. The AQI reading was just 65 there, allowing her “cough and cold to disappear within hours, without medical aid,” Sharma, who works at a tech company, said.

Unlike Sharma, many in Delhi – particularly those in labor-intensive roles – have not been able to escape the pollution.

Thirty-seven-year-old Dinesh Kumar is one such person. The auto-rickshaw driver hails from Patna in the province of Bihar, over 1,000 kilometers east of Delhi. He was forced to find higher-paying work in the capital city to support his aging parents and school-going children.

Kumar dreads the winter months when pollution levels are heightened and people stay indoors. However, he says he does not have the means to move out of Delhi to seek employment in this period.

“My auto is empty on most days [during this time]. At most, I get one or two passengers now, compared to around 20 at other times of the year,” he laments, using the local term for a motorized, three-wheeled vehicle.

When he does drive, he says he is “constantly coughing.” “I feel like there’s chili in my eyes because I’m [tearing] and cannot see. If I stop working, my family will have no money” he told CNBC’s Inside India.

Delhi’s smog conundrum is a yearly problem permeating through the Indo-Gangetic plains – or northern states in India between October and December.

With Delhi’s smog problem taking centerstage every winter, the natural assumption is that the lower temperatures, or activities like agricultural stubble burning which happen in this season have a large part to play in elevating pollution levels.

However, Anumita Roychowdhury executive director of research and advocacy at the Centre for Science and Environment, argues that the “explosion” in air quality metrics is not because of a sudden spike in pollution-related activities in this season.

“Pollution is high and remains elevated all throughout the year. It is not that there is pollution only during winter,” she explained. Instead, she attributes the worsening readings to adverse meteorological conditions in the Indo-Gangetic plains where pollution that is already in the air from different sources gets trapped and has no wind to blow it away.

Delhi, and other northern Indian states are most susceptible given its “geographical disadvantages,” Roychowdhury explained.

“Mumbai or Chennai have much better natural ventilation because they have the open sea. So, even though pollution levels are very high in Mumbai, it does not accumulate, and the concentration doesn’t become as big as northern India, because the open sea, the natural ventilation index there is much better,” she added.

For its part, the Delhi government has undertaken several measures to curb pollution. In the past, it has even experimented with restricting the number of vehicles on the road based on their license plate numbers. However, Roychowdhury stresses that other states in northern India will now need to step up their efforts in addressing this problem.

“Pollution does not follow boundaries,” she said, quoting estimates from the Indian Institute of Tropical Meteorology, showing that 70% of particulate matter 2.5 is coming from the larger region outside Delhi.

Particulate matter 2.5 refer to particles in the air like smoke, soot, bacteria and pollen with a diameter that is 2.5 micrometers, or around the thickness of a single strand of hair.

The longer-term implications of Delhi’s poor air quality extend beyond just compromising residents’ health and well-being to creating ripples in the economy.

Data from Dalberg Advisors, Clean Air Fund, Blue Sky Analytics and trade body CII, highlights that India’s capital New Delhi (which is part of NCR) loses 6% of its annual Gross Domestic Product (GDP) to air pollution.

Meanwhile, air pollution costs Indian businesses $95 billion or around 3% of India’s Gross Domestic Product (GDP) every year, the same report published in 2021 showed.

Those in the middle and lower-income groups are often the worst hit.

“The smog disproportionately affects the poor because the government is temporarily shutting down or phasing out polluting industries which absorb a significant number of semi-skilled and unskilled labor on daily wages,” Sumedha Dasgupta, senior analyst at the Economist Intelligence Unit (EIU) said.

Elsewhere, she noted that consumer-facing sectors such as retailers have also felt the pinch as people are now veering towards online shopping. Similarly, businesses servicing India’s booming wedding industry have been affected by consumers postponing their celebrations because of the poor weather.

The interconnected nature of India’s cities means that the economic weakness in Delhi could eventually extend to other parts of India.

“There is a domino effect in many areas,” Dasgupta said, using the construction industry as an example. Halting activities in Delhi would in turn mean stopping the purchase of sand from Bihar as well as cement and raw materials from another part of India, which would then impact the labor and efficiency levels in those states.

“So in the long-term you are slowing down the economies of those regions as well,” Dasgupta explained.

While the seasonal smog is likely to taper off by the end of winter in January, it is imperative for Delhi – and the wider north India region – to craft strategies to minimize its yearly recurrence.

Failure to do so may bring about other problems such as pushing people and investments out of the highly-polluted areas and into other parts of India.

That will end up creating a “migration burden” and add pressure to the infrastructure in other major metros like Mumbai, Bangalore or Hyderabad, which may have “to take on the load of people who can’t live in or are migrating out of Delhi,” Dasgupta said.

“So, it can certainly create a lot of issues on a national level, in terms of loss of productivity and traction in industries,” she added.

For starters, Roychowdhury suggests a shift away from “middle-class environmentalism” towards a more solution-based approach to address the problem. At a consumer level, this involves reducing the usage of cars and opting for public transport instead, where possible.

Meanwhile, she notes that businesses can look into sustainable and environmentally-friendly financing strategies. This would involve investing in infrastructure that minimizes the use of private transportation, as an example.

“We need to repurpose our investment that otherwise goes into car-centric infrastructure, and divert that funding towards building infrastructure for walking, cycling and public transport, that will certainly give us a much bigger pay off and help us to prevent and control pollution more efficiently,” Roychowdhury added.

She argues that businesses can also look into repurposing the residue of the crops that farmers are burning. There have already been instances of this in Delhi and the NCR, where biomass-based fuels absorbing agricultural waste and crop residue are being used by the industrial sector in place of natural gas.

These improvements are part of a long road to addressing a major problem in India. If handled well, it can mean that businesses embrace Delhi, while residents like Sharma and Kumar remain healthy, bolstering both their income and the nation’s economic growth.

The lower-than-expected economic growth in India’s fiscal second quarter is a “temporary blip.” That’s according to the country’s finance minister Nirmala Sitharaman. “This lower growth situation is no different from the earlier years when Lok Sabha elections were conducted,” Sitharaman said, referring to the June elections in India’s lower house of parliament. She also noted that government capital expenditure has risen 6.7% year on year.

India’s trade deficit in November was wider than expected. In the April to November period, India’s imports rose 8.35% compared with its export growth of 2.17%, year on year. That’s led to a trade deficit of $37.84 billion in November, higher than the $23 billion expected by a Bloomberg survey. In October, that figure came in at $27.1 billion.

Earnings growth in India has faced challenges recently. Disruptions caused by the monsoon and elections in India have hit earnings in the last few quarters, according to Rohit Shimpi, Fund Manager at SBI Mutual Fund. That said, he says the economy looks set to pick up as companies and the government accelerate their capital expenditure.

Global markets have lagged behind the U.S. this year. Year to date, the iShares MSCI ACWI ex U.S. ETF has risen 3.17%, compared with the S&P 500‘s 23.87% increase during the same period. Strategists see more bumps in 2025 for global markets. However, “India is still the market to beat” neat year, one strategist said. [For subscribers only]

Indian stocks continued to fall this week. The Nifty 50 index is down 3.3% since last Friday’s close. The index has risen 10.2% since the start of the year.

The benchmark 10-year Indian government bond yield has moved up by over 5 basis points since the end of last week, to 6.786%.

On CNBC TV this week, Carl Ashton, investment counselor at Citi Private Bank, said that the bank is maintaining an overweight stance on India. Even though stock prices are around 20- to 22-times earnings, corporate earnings are growing in the region of high double-digits. India’s projected 7% growth in gross domestic product next year might help recover corporate earnings as well. Hence, the valuation of Indian equities looks “reasonable,” Ashton said.

Meanwhile, Puneet Gupta of S&P Global Mobility, said that India and Tesla have a mutually beneficial relationship. India needs Tesla’s expertise to manufacture electric vehicles and develop the domestic EV industry, while Tesla needs India because the country is the third-largest market in the world — and middle-class people in India are “really scouting for EVs, specifically in the luxury segment.”

Interest rate decisions and inflation readings dominate the economic calendar next week. Indian IPOs are scarce as the end-of-the-year lull descends.

December 19: U.S. third-quarter GDP final figures, Bank of Japan interest rate decision, Bank of England interest rate decision

December 20: U.S. personal consumption expenditures price index for November, India monetary policy meeting minutes, Japan inflation rate for November, Euro zone consumer confidence flash data for December

The Bank of Japan on Thursday held its benchmark interest rate steady at 0.25%.

The decision comes a day after the U.S. Federal Reserve cut rates by 25 basis points, bringing the federal funds rate to 4.25%-4.5%.

The BOJ’s decision was in line with a CNBC poll, which showed that 13 out of 24 economists expected the BOJ to keep its key interest rate unchanged in December before raising the rate at the next meeting in January.

The survey was conducted between Dec. 9-13, before the Fed signaled that there would be fewer rate cuts in 2025.

A Dec. 13 note from Citi forecast that the BOJ will hike three times in 2025, bringing the rate to 1%.

This is a breaking news story. Please refresh for updates.

Top Japanese carmakers Nissan Motor and Honda Motor are understood to be exploring a blockbuster merger, sending shock waves through the global automotive industry as the two rival companies seek to stay competitive on the road to full electrification.

Nissan and Honda are planning to enter into negotiations for a merger, Japanese business newspaper Nikkei reported overnight, citing sources close to the matter and noting that the domestic peers expected to sign a memorandum of understanding shortly. The two companies will also reportedly look to bring Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, into the deal.

The prospective tie-up could create the world’s third-largest auto group by vehicle sales, with 8 million sales annually, according to Citi. That would place Nissan-Honda-Mitsubishi behind fellow Japanese automaker Toyota Motor and Germany’s crisis-stricken Volkswagen, respectively.

In similar statements, Nissan and Honda neither confirmed nor denied the Nikkei report. The newspaper later reported that talks could begin as early as next week.

The merger report comes at a time when many auto giants are struggling to cope with increased global competition from bigger electric vehicle makers such as Tesla and China’s BYD.

Nissan and Honda previously forged a strategic partnership in March to collaborate on producing key components for EVs.

A megamerger, however, is expected to face several obstacles. Analysts have expressed concerns about the likelihood of political scrutiny in Japan, given the potential for job cuts if a deal pushes through, while the unwinding of Nissan’s alliance with French vehicle manufacturer Renault is regarded as pivotal to the process.

Peter Wells, professor of business and sustainability at Cardiff Business School’s Centre for Automotive Industry Research, described the reported merger as a “really important” development — one that could help Nissan and Honda pool their assets, save money on costs and create the technologies they need for the future.

“There’s been a lot of speculation about the position of Nissan over the past 12 months or so. It’s been trying to equalize or balance out its relationship with Renault, but it’s been struggling,” Wells told CNBC’s “Street Signs Europe” on Wednesday.

“It’s been struggling in the market, it’s been struggling at home, it doesn’t have the right product line-up. There are so many warning signs, so many red flags around Nissan at the moment that something had to happen,” he added. “Whether this is the answer is another question.”

Shares of Nissan soared almost 24% on Wednesday, notching the firm’s best trading day in at least 40 years, according to data firm FactSet. The firm’s Tokyo-listed stock price remains nearly 25% lower year to date.

Honda shares, meanwhile, slipped over 3% in New York.

Asked whether consolidation between Nissan and Honda could emerge as a good recourse to combat the competition from Chinese EV carmakers, Cardiff Business School’s Wells said the deal could be characterized as “a traditional solution.”

“My concerns would be that perhaps they have left it a bit late, that they don’t have the current technology and set-up [or] the right product to compete in their key markets,” Wells said.

“For Nissan particularly, they are out of step with the U.S. market. That’s their major concern, and they cannot fix that very quickly,” he added.

JPMorgan’s Akira Kishimoto shared similar views on some of the barriers to a prospective Nissan-Honda merger, saying “the hurdles to overcome would be high.”

“At a minimum, we think Nissan needs to clarify where its particularly complex capital relationship with Renault, which involves the French government, will end up and also provide details on the restructuring proposal it announced,” Kishimoto said in a research note published Wednesday.

“We think Honda needs to show how it will manage major [battery electric vehicles] and battery investments in Canada,” Kishimoto said.

JPMorgan said it would now need to wait for any concrete announcements from either company.

“This tie-up is not entirely unexpected because obviously they announced their partnership earlier this year,” Lucinda Guthrie, executive editor at Mergermarket, told CNBC’s “Street Signs Europe” on Wednesday.

“Some of the reports I’ve seen claim that this came about as a result of Foxconn making an approach to Nissan. Now, with this particular transaction, I question whether it is going to be a hardcore merger or whether it is going to be more of a partnership,” she added.

Apple supplier Foxconn approached Nissan about taking a stake, Bloomberg reported Wednesday, citing an unnamed source. The Taiwan-based company has been investing heavily in EVs in recent years. CNBC has contacted Foxconn for comment.

Echoing the latest development, Honda recently tested the water over a partnership with General Motors, before ultimately deciding to walk away.

Speculation over consolidation between Honda and Nissan could follow a similar trajectory, Guthrie said.

“You have to bear in mind that this would have to come with the Japanese government’s blessing because there is the potential for workforce cuts but then, how are the Japanese automakers going to compete with the low-cost vehicles from China?” Guthrie said.

Citi’s Arifumi Yoshida said a merger would likely have a negative impact for Honda, but a positive one for Nissan and Mitsubishi.

“Given Honda’s competitiveness in motorcycles and [hybrid electric vehicles] and the strength of its brand, we believe it is positioned to take on rivals for the next 5-10 years,” Yoshida said in a research note published Wednesday.

Yoshida nevertheless said the decision could be viewed as one made “in anticipation of the full-scale transformation of the auto industry.”

— CNBC’s Michael Wayland contributed to this report.

Shares of Japan computer memory manufacturer Kioxia rose about 10% on its debut in Tokyo after the company raised over just over 120 billion yen ($800 million) in its initial public offering.

Shares closed on Wednesday at 1,601 yen, higher than the offer price of 1,455 yen per share, which was the midpoint of its IPO price band ranging from 1,390-1,520 yen.

Kioxia initially offered 71.8 million shares, but later exercised an overallotment option to offer an additional 10.79 million shares, according to a filing in Japanese on Monday.

The IPO consisted of Kioxia issuing new shares, as well as a sale of shares from major shareholders Bain Capital and Toshiba.

Early on Wednesday, Reuters reported that Kioxia had requested its major shareholders to sell more shares so as to meet listing requirements on the Tokyo Stock Exchange’s Prime market.

Kioxia revealed that the ratio of shares in the market is only at 28.09%, below the Prime market’s requirements of 35%.

Kioxia, formerly known as Toshiba Memory, was the chip division of Toshiba, and was sold to a Bain-led consortium in 2018 for $18 billion.

This is not Kioxia’s first crack at trying to list on public markets. Back in 2020, Kioxia postponed plans for an IPO on the grounds that “continued market volatility and ongoing concerns about a second wave of the pandemic” meant that it was not in the best interest of shareholders to proceed with a public listing, it said in a statement at the time.

Reuters reported in September that Bain scrapped its plan for an IPO in October. This was due to a sell off in Japanese stocks in August, which made the 1.5-trillion-yen valuation that Bain had been targeting “challenging,” according to the Reuters report.

Hong Kong recorded a notable pickup in listing activities this year, as more Chinese companies turned to the city to raise capital and investors grew optimistic after Beijing pledged to support the offshore market.

The Hong Kong stock exchange saw new listings jump for the first time after three consecutive years of declines, in terms of deal values, according to data compiled by Dealogic. That included initial public offerings and additional follow-on share sales.

The city’s bourse raised a combined $10.65 billion across 63 deals this year, marking a significant increase of more than 80% compared to the $5.89 billion raised across 67 in 2023 — which was the lowest since 2001, according to Dealogic. 

As another sign that companies and investors are regaining confidence in Hong Kong’s market, the average deal size nearly doubled from the previous year to $169 million.

The number of firms seeking public flotations in Hong Kong started picking up in the second half of this year, as the Chinese securities regulator in April pledged to support the Hong Kong market and facilitate more IPOs from leading mainland companies.

Beijing’s ramped-up stimulus package has further fueled companies’ interest in raising capital in the offshore city and lured back some foreign capital funds, experts said.

Looking at IPOs alone, Hong Kong is set to rank fourth globally in terms of funds raised this year, according to KPMG, trailing India and the U.S. stock exchanges.

“There are a lot of pent-up demand for capital raising” since 2022, when the city’s economy sought to shake off a pandemic-induced slowdown, Andy Maynard, managing director and head of equities at China Renaissance said in an email.

Despite some “signs of life,” Maynard cautioned that only when “we see continued improvement in the onshore economy and geopolitical tensions continue to soften” can one expect a further pickup in Hong Kong’s IPO activities.

For years, listing activity in the Asian financial hub had declined as geopolitical tensions and higher interest rates globally dampened investors appetite to buy into Hong Kong and Chinese equity capital market deals.

China’s economic downturn and a stubborn housing market crisis also raised worries among issuers and investors when it came to companies valuations.

Investor sentiment has improved this year, especially toward sectors which would benefit from the policy support, such as consumption-related businesses, said Qing Wang, chairman and chief strategist at Shanghai Chongyang Investment Management. 

Midea Group, which sells air conditioners, washing machines, elevators and other consumer products, in September clinched the city’s largest listing since early 2021. Its shares listed in Hong Kong have jumped over 36% from its offer price, as investors remain hopeful of its position to benefit from Beijing’s “trade-in program,” aimed at encouraging consumers and businesses to upgrade existing appliances and equipment.

There were 90 IPO applications pending listing or under processing as of Nov. 29 according to the exchange’s website.

While the city may see a more active IPO pipeline in 2025, it is likely to be a “gradual recovery” rather than a “V-shaped” one, said John Lee, vice chairman and co-head of Asia country coverage at UBS global banking Asia.

So far this year, mainland investors have bought $96.4 billion worth of Hong Kong stocks, surpassing last year’s total of $42 billion and heading towards the biggest year since a $87 billion buying spree in 2020, according to data from Goldman Sachs.

“There is also a return of foreign long-only [funds] to China [and] Hong Kong equities, though the pace is gradual,” said Perris Lee, head of APAC equity capital market at Ion Analytics.

Not all new listed stocks have traded well. Chinese autonomous driving firm Horizon Robotics and bottled water maker China Resources Beverage —the two largest IPO deals in the city this year — saw their shares decline by 12% and 11%, respectively, as of Wednesday from offer price levels.

Investors need to see “concrete evidence of stimulus policy effectiveness”, Shanghai Chongyang’s Wang said. He expects some improvement in sentiment early into the second quarter next year when the public companies start releasing earnings.

The benchmark Hang Seng Index is heading for its first annual gain after four straight years of declines, surging over 16% so far this year.

That said, the rally, fueled by Beijing’s massive stimulus package in late September has lost some of its momentum.

Looking ahead, China Renaissance’s Maynard said that while the Hong Kong stock market may have turned the corner, he did not see “any prospect of a Santa rally.” The market remained “trapped and range-bound” as Beijing’s stimulus announcements since September have underwhelmed.

Nissan Motor shares surged Wednesday following a media report that the struggling Japanese automaker is looking to merge with Honda Motor, forming a bigger entity that can compete with larger rivals and invest more in the growing market for electric vehicles.

Nissan shares were last trading up 22%, while Honda shares slipped 1.6%.

Honda and Nissan are considering operating under a holding company, and soon will sign a memorandum of understanding, according to a report in the Nikkei newspaper. They also look to eventually bring Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, under the holding company, according to the report.

The merger, if successful, will be especially beneficial to Nissan, which had previously announced plans to slash 9,000 jobs and cut global production capacity by a fifth amid fierce competition in its major markets.

Joe McCabe, the president and CEO of AutoForecast Solutions, told CNBC Wednesday that Nissan needs a “revitalization” after its relationship with Renault went sideways.

“They [Nissan] really didn’t have a leadership position in any one of the segments they competed in,” he said.

In a statement, Nissan said media reports that it is “considering a business integration” with Honda are not based on an announcement from our company. Nissan said it is considering various possibilities for future collaboration with Honda and Mitsubishi, but no decisions have been made.

The combined Nissan-Honda-Mitsubishi enterprise would equate to more than 8 million vehicle sales annually, according to Nikkei. That would place the company among the world’s largest automakers, but still below fellow Japanese automaker Toyota Motor, at 11.2 million in 2023, as well as German automaker Volkswagen, which last year reported sales of 9.2 million vehicles.

The merger report follows the two Japanese automakers entering into a strategic partnership earlier this year on shared automotive components and software.

Such a tie-up would be the largest automotive industry merger since Fiat Chrysler joined with France-based PSA Groupe to form Stellantis in January 2021.

– Michael Wayland contributed to this report.

DETROIT — Japanese automakers Nissan Motor and Honda Motor reportedly plan to enter into negotiations for a merger to better compete in the rapidly changing global automotive industry, the Nikkei newspaper reported Tuesday.

Honda and Nissan are considering operating under a holding company, and soon will sign a memorandum of understanding, according to the report. They also look to eventually bring Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, under the holding company.

The combined Nissan-Honda-Mitsubishi enterprise would equate to more than 8 million vehicle sales annually, according to Nikkei. That would place the company among the world’s largest automakers, but still below fellow Japanese automaker Toyota Motor, at 11.2 million in 2023, as well as German automaker Volkswagen, which last year reported sales of 9.2 million vehicles.

In similar statements, Honda and Nissan neither confirmed nor denied the report: “The reported content was not released by our company,” Honda said. “As announced in March of this year, Honda and Nissan are exploring various possibilities for future collaboration, leveraging each other’s strengths. We will inform our stakeholders of any updates at an appropriate time.”

The merger report follows the two Japanese automakers entering into a strategic partnership earlier this year on shared automotive components and software.

Such a tie-up would be the largest automotive industry merger since Fiat Chrysler joined with France-based PSA Groupe to form Stellantis in January 2021.

Automotive consultants and other experts have recently been calling for an increase in mergers and acquisitions to share costs and better compete against rapidly expanding Chinese automakers as well as U.S. all-electric vehicle leader Tesla.

U.S.-traded shares of Honda closed up about 1% on Tuesday. Over-the-counter shares of Nissan, which is in the middle of a restructuring, jumped more than 11%.

Indonesia’s efforts to attract capital from Apple and other tech companies through local investment and manufacturing requirements are not enough to yield long-term gains and may backfire, economists warn. 

Because of Indonesia’s long-standing local content policies,or “TKDN,” Apple has been unable to sell its latest iPhone model in the country until it invests or sources more components locally.

On Dec. 3, Indonesia’s deputy industry minister told reporters that the country plans to increase the local content requirement for smartphone investments.

The plans come after the government turned down a $100 million Apple proposal aimed at paving the way for iPhone 16 sales. Instead, the government is now asking Apple to invest $1 billion in cell phone component production in the country.

The content requirements, which apply to various industries ranging from solar panels to electric vehicles, aim to protect local industries and create a value-added supply chain in Indonesia. 

Their potential ramp-up comes at a time when Indonesia is competing with other developing Southeast Asian countries, such as Vietnam, to attract investment and supply chains diverted from China.

But while the content policy has attracted commitments from some manufacturers in the past, economists say it is still misguided and ignores many of the deeper reasons Indonesia has failed to entice tech supply chains.

“I call it pseudo-protectionism. It’s less about protecting the domestic market from imported products and more about trying to scare foreign direct investment into the country,” said Bhima Yudhistira Adhinegara, executive director of the Center of Economic and Law Studies (CELIOS), an Indonesian think tank.

“They think if they scare big corporations like Apple, they will invest more into Indonesia,” he added.

An Apple analyst previously told CNBC that Indonesia would be a promising growth opportunity for the Cupertino-based company if it is able to get a foothold in the market. 

Until recently, Apple had won goodwill in the market by building “Apple Developer Academies” in the country, where students are trained in skills such as software development.

During a visit to Indonesia in April, Apple CEO Tim Cook announced that the company would open a fourth academy in Bali.

However, the government is now seeking more of Apple’s supply chain and wants local facilities involved in the actual manufacturing of products.

Officials have also said that the value of Apple’s previously proposed investments is lower than that of its Indonesian sales, arguing that smartphone companies like China’s Xiaomi and South Korea’s Samsung have invested more.

On Indonesia’s side of the bargaining table, it has the largest consumer base in Southeast Asia and the fourth-largest population in the world. 

Still, Indonesia is a small overseas sales market for Apple, with few consumers wealthy enough to buy a cutting-edge iPhone, economists said. The company’s market capitalization alone is bigger than Indonesia’s gross domestic product. 

On that note, Apple may be more interested in using Indonesia as a gateway to the regional market, said Arianto Patunru, board member at the Center for Indonesian Policy Studies and economist at the Australian National University.

He added that global tech supply chains such as Apple’s involve slicing up the value-added, so each country might only contribute a small amount.

Indonesia’s content policy requires 40% of smartphones and tablets to be locally made.

Most economists who spoke to CNBC said they did not believe that content policies would work to attract companies like Apple and would instead have the opposite effect.

“Local content requirements have not been successful in attracting FDI to Indonesia. Quite the contrary,” said Patunru, suggesting they contributed to companies like Foxconn‘s and Tesla‘s withdrawal of plans in the country in recent years.

Instead, Indonesia’s attempts to use “scare tactics” towards companies like Apple “may backfire,” according to CELIOS’ Adhinegara.

“I think it’s very bad for the investment climate in Indonesia and creates uncertainty on regulation,” Adhinegara said, noting that often regulations appear to be enforced on a case-to-case basis. 

Yessi Vadila, a trade specialist at the Economic Research Institute for ASEAN and East Asia, said that local content requirements in Indonesia have historically been tied to increased costs, decreased export competitiveness, and productivity losses while offering little impact on growth or employment.

Other economists noted that the local content policies have racked up some surface-level successes in the past, though they said they would not be enough on their own to attract more investments from companies like Apple.

“I would say they have been successful in trying to build some factories and facilities,” said Indonesian economist Krisna Gupta, noting that other smartphone makers, such as Samsung, have had to invest in the market because of regulations. 

In addition to its local content requirements, Indonesia has also implemented other protectionist policies, including tariffs, to drive greater investments into the country. Last year, a new law banned TikTok’s commerce app until the company invested through a local partner. 

Still, while Gupta said the strategy may find some success in the short to medium term, it will be met with problems in the longer run unless the government is also able to increase productivity and the overall business climate.

“Indonesia will need to step up their game across the board,” Gupta said, noting that companies consider a range of factors, including law enforcement, stability of trade policy, and the labor market.

“They can’t just say, we have a big market; you must want to be here, so please invest more,” he added.

To attract more FDI, the country must prioritize building competitive infrastructure, building human capital, and offering investment incentives, according to CELIOS’ Adhinegara.

Economists who spoke to CNBC pointed to Vietnam as a country that has managed to attract more tech investments despite not having as large of a local consumer market as Indonesia.

Instead of strict local content requirements, Vietnam has successfully leveraged investment incentives, consistent policies and strong infrastructure relative to its regional peers, they said.

The country has also has managed to set up a free trade agreement with Europe, whereas Indonesia is still trying to reach terms on a deal. Vietnam has also been one of the main beneficiaries of shifting supply chains from China amid growing U.S.-China trade tensions.

According to Adhinegara, Indonesia may soon be presented with a prime opportunity to attract diverted manufacturing, with Donald Trump set to return to the White House.

The president-elect has proposed massive escalations of tariffs on China, which could trigger another trade war and shake up Asian supply chains.

However, unless the Indonesian government understands why companies like Apple have chosen Vietnam over it in the past, they could miss out once again, said Adhinegara. 

While Indonesia’s foreign direct investment has been growing over the years, its FDI as a share of GDP has only decreased over the past two decades, according to data from the World Bank.