Asia week ahead: Upbeat data from Japan and China, but coming bite from tariffs keeps markets on edge

We are expecting upbeat data from Japan. The frontloading of goods being shipped to the US will likely boost core machinery orders and exports. This, however, doesn’t mean the positive tone will be carried over beyond the first quarter amid increasing uncertainty over tariffs. On the inflation front, consumer prices are expected to accelerate in March, driven by higher services costs. Earlier increases in fresh food are likely to be gradually passed on, particularly to eating-out and processed food costs. The Bank of Japan will monitor closely how the US tariff policy impacts the economy, leaving rates unchanged for the time being.

China will release almost all of its key data sets for March. The main event is first quarter GDP on Thursday. We look for a rather sanguine 5.3% year-on-year growth rate. This reading, of course, comes before tariffs start to bite from the second quarter onward. As of March, domestic activity is expected to remain resilient. We expect retail sales and industrial production to edge up to 4.5% YoY and 6.0% YoY, respectively. Fixed-asset investment is likely to remain broadly stable, down 0.1pp to 4.0% YoY, year to date. Trade is seen moderating a bit further in March as tariffs came into effect. But the bigger hit is likely yet to come.

We will also be watching property prices. The question is whether market volatility translated into further downward pressure on prices. This year’s focus is on supporting domestic demand. But we expect it will be challenging to restore household confidence as long as home prices are still falling. The recent stabilisation of prices in tier 1 and 2 cities is a good start, but prices have yet to confirm a trough countrywide.

Data aside, all eyes will be on the China policy response after Trump imposed 145% tariffs on Asia's biggest economy. Markets will await signs of policy support in the week ahead. Rate and reserve-requirement-ratio (RRR) cuts are possible, along with further announcements of fiscal policy plans to support domestic demand.

It’s a close call, but we expect the Bank of Korea to cut its policy rate by 25 bp at Thursday’s meeting. The market consensus is still leaning towards no BoK action in April. The difference between April and May depends on how the BOK interprets recent won weakness. While the BoK acknowledges the negative impact of tariffs on the economy, it’s cautious about whether rate cuts may weaken the KRW further from current levels. Our argument is that despite President Trump’s 90-day tariff pause, downside risks to growth have increased more than expected and the KRW has moved to the 1,450 level. As such, the Bok’s priority is likely to be on supporting growth.