Asia week ahead: Japan rate decision and key data from China and Australia<\/p>\n
Japan: Inflation and labour market data complicate rate decision<\/p>\n
Japanese data should indicate that inflationary pressures are intensifying, while the economy remains resilient. We expect labour market conditions to remain tight with the jobless rate edging down to 2.5%. Monthly activity data should rebound quite firmly, partially offsetting the previous month\u2019s declines. We don\u2019t think the energy shock has had a significant negative impact on production so far. Meanwhile, the Tokyo CPI is expected to rise faster in April, reflecting recent energy price hikes, a weak JPY, solid wage growth, and bi-annual price adjustments.<\/p>\n
These developments complicate the Bank of Japan\u2019s rate decision on Tuesday. Markets widely expect the BoJ to stay on hold amid uncertainty surrounding the Middle East situation. We continue to believe there\u2019s a chance that the BoJ may hike on 28 April. Board members\u2019 concerns about higher inflation expectations are likely to increase as real interest rates remain deeply negative. CPI inflation accelerated more than expected in March. It\u2019s set to accelerate further in the coming months.<\/p>\n
The BoJ will release its quarterly outlook report on rate-decision day. The inflation outlook is likely to be revised upward from the current 1.9% to 2.4% for fiscal year 2026 and 2.0% to 2.2% for FY2027. Meanwhile, the GDP outlook is expected to be revised down modestly from the current 1.0% to 0.7% for FY2026. Even with the downward revision, GDP is expected to remain above potential, which should support BoJ rate hikes.<\/p>\n
South Korea: Exports to show strength<\/p>\n
Early April trade data shows robust chip exports are driving Korean export growth. With memory chip prices climbing and refineries passing higher input costs through to output, we expect April exports to increase 50% year over year.<\/p>\n
China: PMI data could see a contraction<\/p>\n
China releases its April PMI data. The official PMI rebounded to expansionary territory in March. In April, we could see the index dip back into contractionary territory, with the manufacturing PMI falling to 49.9 and the non-manufacturing PMI dipping to 49.8. We\u2019re likely to see evidence of price pressures continuing to build in the PMI sub-indices.<\/p>\n
Taiwan: We expect continued growth in Q1<\/p>\n
Taiwan releases its first-quarter GDP data on Thursday. We expect Taiwan\u2019s stellar growth to continue, with 11.5% YoY in the January-March period amid consistently outperforming data so far this year.<\/p>\n
Growth will be primarily driven by external demand again. There\u2019s been a flurry of upward revisions over the last two years, as the economy continues to exceed expectations at nearly every turn. We revised our full-year GDP forecast up to 8.2% YoY from 6.7% YoY earlier this month. The first quarter release will go a long way to showing if this is an overshoot or still too conservative.<\/p>\n
Australia: Inflation to reflect oil price surge<\/p>\n
Australia\u2019s CPI is expected to accelerate to 4.6% YoY, largely driven by the surge in oil prices. Inflation dynamics are likely to deteriorate further in the second quarter amid ongoing geopolitical tensions and no meaningful de\u2011escalation in the war. If the Reserve Bank of Australia intends to stay ahead of the curve, it\u2019s likely to move in May rather than waiting until August.<\/p>\n
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