Intriguing Times Ahead: Asian Markets Anticipate Japan's Economic Indicators
A tranquil atmosphere prevailed in global markets today, as the easing of the US dollar and bond yields accompanied a steady performance in equity markets, setting an optimistic tone for Asian markets on Friday. Investors are focusing on Japan due to significant political and economic events.
The general elections scheduled for Sunday could potentially alter the power balance in Japan's parliament. Recent polls suggest the current ruling coalition might lose its majority, which could affect the Bank of Japan’s (BOJ) ability to transition smoothly away from near-zero interest rates.
Tokyo's consumer inflation data, a leading indicator of national price trends, is due on Friday. This key economic indicator is expected to fall below the BOJ's 2% target for the first time in five months, with an anticipated annual rate of 1.7%, down from a 2.0% rise in September, marking a deviation from the target since May.
Amidst these developments, a senior official from the International Monetary Fund (IMF) suggested that any increase in interest rates in Japan should be gradual. Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department, highlighted the potential ripple effects of BOJ policy changes on global financial markets, particularly considering Japanese investors’ substantial holdings in other countries.
Srinivasan also noted that many Asian central banks might have the opportunity to lower interest rates, especially as the US begins to ease monetary policy, which could alleviate currency depreciation concerns.
The Japanese yen saw a notable recovery today, recording its largest rise in a month. This movement pushed the dollar down to 151.50 yen from Wednesday's three-month high of 153.00 yen. Despite the yen's recent depreciation, foreign investors have been purchasing stocks in Japanese markets for the fourth consecutive week, up to October 19. However, a cautious approach prevails due to the upcoming elections and corporate earnings announcements.
Despite the yen's recovery and foreign capital inflow, the Nikkei index entered Friday's session with a weekly loss exceeding 2%.
In other regional news, Singapore is set to release industrial production figures for September. Expectations are for growth to significantly slow to 3.5% year-on-year, a sharp contrast to the 21% leap seen in August, which was one of the strongest increases in the last 15 years and the highest since 2021.
Friday's economic calendar also includes Tokyo’s October CPI inflation data, Japan’s September service PPI inflation, and Singapore’s industrial production figures, which are expected to provide further market guidance.