Asia week ahead: Chinese loan prime rate decision and data on Japan and Taiwan

We expect no change to the loan prime rates for Chinese banks on Wednesday. The People’s Bank of China hasn’t made any adjustments to the 7-day reverse repo this month. Rather than direct rate cuts, policymakers recently moved to support credit activity in more targeted ways, with subsidies for consumer loans set to come into effect in September.

Taiwan's export orders, out on Wednesday, are expected to moderate. After spiking to a four-month high of 24.6% year-on-year in June, we expect orders to have moderated back to around 15% YoY in July. Though data should still benefit from the strong external demand seen recently, it will be more interesting to gauge any changes in August after US reciprocal tariffs came into effect.

Japan’s national consumer price index for July, out on Friday, will likely show that prices continue to cool. Food costs are expected to rise, though falling utility prices should ease overall inflation pressures. Headline inflation will continue to cool down to 3.1% YoY in July. But thanks to base effects, monthly comparisons should rebound to 0.2% month on month from -0.1% in June.

Meanwhile, the flash purchasing managers’ index is likely to improve in August. The US-Japan trade deal should reduce uncertainty, while the local equity market has gained modestly. The manufacturing PMI should stay below 50, but improving services activity should remain the key growth driver for the economy.

We expect exports to drop by 2.0% YoY in July, mostly due to a high base from last year. We believe there might have been some front-loading before 1 August, the deadline for many of President Trump’s tariffs. The largest export item, cars, should also advance. Strong demand in the artificial intelligence space is likely to boost semiconductor and equipment exports.