Asia week ahead: Japan and Korea data plus regional manufacturing readings

Asia Market: Optimistic Headlines From Regional Leaders China And Japan

Data from Japan and Korea will be the highlight for next week

Source: Shutterstock
Source: Shutterstock

Japan's flurry of data releases

Industrial production in Japan is expected to rebound from the previous month’s contraction on the back of better domestic demand, although gains may be capped as global supply chain disruptions are still weighing on overall production activity. Meanwhile, Tokyo CPI inflation should increase after a recent deprecation in the yen combined with higher energy and food price pressures.

Japan’s labour market will also be in focus. The unemployment rate should remain unchanged at 2.5%, as service sector hiring is still picking up while there is some slowdown in manufacturing. Lastly, the Tankan surveys will possibly show an optimistic outlook for both manufacturing and services, with large companies seeing slightly stronger gains and small companies still struggling to recover from the pandemic. The Bank of Japan will be paying more attention to inflation if there are any signs of increasing demand pressure while labour market tightening could lead to stronger wage growth.

Korean trade and industrial production data

The reopening of Korea is boosting the domestic economy, especially private services, but the recent sharp drop in the equity market and higher mortgage/lending rates could put some downward pressure on consumer confidence. Meanwhile, business sentiment is expected to recover as domestic and global logistics conditions improve. May’s industrial production should rebound but the recovery could be marginal given China’s lockdown.

Korea also reports preliminary trade data, with export growth likely moderating in June. Unfavourable calendar day effects could be one reason for the slowdown, but the trucker’s union strike has had a slight negative impact on port activity as well. Imports, on the other hand, should grow at a faster pace and the overall trade balance could post a high deficit.

Upcoming data reports will be critical for the Bank of Korea, as the central bank’s next moves will possibly be impacted not just by the inflation trajectory but also by the growth outlook.

Manufacturing reports could show sustained impact of China stoppages

Next week also features the release of regional manufacturing indices, with China also reporting its non-manufacturing PMI on 30 June. We could see the protracted impact of work stoppages in China and their effect on the regional value chain.   

And the rest...

Meanwhile, India’s fiscal deficit figures on 30 June will show whether India is on track to hit its 6.4% fiscal deficit target for the fiscal year 2022/23. The April deficit figures were helpful, coming in lower than in April 2021. This bodes well for a reduction in the deficit as a percentage of nominal GDP, which should be growing strongly, lifted by higher inflation. Cuts in excise duties, higher debt service, and the higher burden of state subsidies could eat into this progress in the coming months, and there is still a long way to go, with the retention of the investment grade credit rating at stake.

In Australia, the retail sales report for May is out on 29 June and will probably moderate from the 0.9% month-on-month pace recorded for April. Though it should still remain decent, rising interest rates and falling consumer sentiment, as well as peaking housing prices, may offset support from strong employment and robust wage growth.

Lastly, Indonesia releases its latest inflation report next week and we could see both headline and core inflation threaten the upper end of the central bank inflation target. Bank Indonesia has held off on hiking policy rates citing still manageable inflation but elevated commodity prices may eventually force domestic inflation past the Bank's comfort zone. Faster inflation by early 3Q could be enough to kickstart the hiking cycle, with a first hike coming as early as the end of July. 

Read this article on THINK

Tags
Emerging Markets Asia week ahead Asia Markets Asia Economics

Disclaimer

This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Asia Market: Optimistic Headlines From Regional Leaders China And Japan

ING Economics

INGs global economists and strategists tell you whats happening and is likely to happen in the world of global markets.

Our analysis and forecasts will help you respond and stay a step ahead in the world of macroeconomics, central banks, FX, commodities and everything else in between. Visit ING.com.

Follow ING Economics on social media:

Twitter | LinkedIn