Asia week ahead: BoJ meeting plus retail sales from China
Next week in Asia, there are several important events occurring in Australia and China.
Next week, the Bank of Japan is scheduled to convene a meeting, but it is unlikely that we will witness any modifications. China is slated to release a plethora of information, but we will be paying special attention to the statistics concerning retail sales.
We’ve adjusted our thinking on the Bank of Japan's plans for the short-term because of what Governor Kazuo Ueda has said lately. Our prediction is that at the upcoming policy meeting next week, the BoJ will keep all their current policy settings the way they are. We also don't think there will be any changes to the BoJ's yield curve control policy this month. However, if inflation stays the same in the latter half of the year, we might still see changes to YCC in the next few months.
In May, China is set to unveil its regular data on the performance of its economy, specifically in terms of industrial production, fixed asset investment, construction, and retail sales. The retail sales figure is predicted to receive the most interest since consumer spending is critically important in maintaining the economy's stability while its production and construction sectors face challenges in a difficult global trade climate.
The information about how well retail sales are doing is expected to be disappointing. We predict that there will be a 13.8% rise in retail sales compared to the same time last year. However, this only looks good because last year's figures were very low. In reality, sales are probably going to drop by about 1% in comparison to the previous month when adjusted for seasonal differences. Housing construction and manufacturing are also expected to continue to struggle.
It's possible that the Australian job market report for May will exhibit a slight rise in the rate of unemployment, increasing from 3.7% to 3.8%. However, this is still a low figure when compared to past trends, and it won't necessarily reassure the Reserve Bank of Australia. We may observe a small increase in the number of people who are employed, as it's probable that the changes that occurred last month (a decrease in full-time employment alongside an increase in part-time employment) will switch around this month.
The job market in Australia isn't performing as strongly as it was, but it isn't indicating a decline either. We anticipate that this situation will continue throughout the current month.
The latest CPI data for May indicates that inflation is well within the Reserve Bank of India's target range of 2-6%. Our forecast predicts that inflation will increase by 0.5% month-on-month and reach 4.3% year-on-year. Currently, the favorable effects of the previous year's data are helping to keep inflation within the acceptable range. However, it is crucial to keep an eye on the monthly trends to ensure that it remains below 0.5% in the upcoming months.
Next week, Indonesia will release its trade data. We predict that both exports and imports will show a decrease, although it may not be as significant compared to the previous month. We anticipate a decline of approximately 12.2% YoY in imports and a slump of 2.1% YoY in exports. This could result in a substantial trade surplus of $4.7bn. Such a significant trade surplus can aid in maintaining a surplus in the current account balance and function as a counterbalance to investment related outflows. This, in turn, may provide some backing to the rupiah.
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