Asia week ahead: Focus on Japan’s GDP data and key inflation release from China

Divergent Chinese PMIs suggest resilient external demand, but soft domestic environment
South Korean output unexpectedly declines amid growing geopolitical risks
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Firm growth expected in Japan despite rising downside risks
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China lowers growth target as geopolitical risk complicates outlook
Our latest views on the major central banks
South Korean inflation holds steady, but upside risks are increasing sharply

China will release its CPI inflation data for February next Monday. We are expecting CPI to rise to 1.0% year-on-year thanks to a boost from the Lunar New Year effect. The impact of higher oil prices from the Middle East conflict likely won't be seen until the March data.

China's trade data for the first two months of the year is also scheduled for publication on Tuesday. The divergence of PMI data suggests that external demand likely remained resilient to start the year, and we are looking for 9.3% YoY growth of exports and 8.5% YoY growth of imports over the first two months of the year, resulting in a trade surplus of $188.1bn.

Labour cash earnings are expected to rise thanks to strong winter bonuses. More importantly, real cash earnings are expected to turn positive thanks to the recent cooling of inflation. Given the stronger-than-expected capital spending data from last week, we expect 2025's fourth-quarter GDP to be revised up from the initial 0.1% quarter-on-quarter sa to 0.3%. Meanwhile, producer price inflation is expected to stay relatively stable at 2.2%.