Asia week ahead: Japan inflation intrigue and Bank of Korea rate decision

Japan: The month-end data dump, led by Tokyo inflation, is the main highlight of the week. We expect Tokyo prices to stabilise at 3.3% in February. Fresh food costs are expected to continue to rise, while some service-sector prices -- especially eating out -- are seen spilling over into broader price gauges. However, the fall in energy prices due to subsidies should offset the overall price hikes. The BoJ will watch closely for signs recent food-cost spikes, especially rice, are being passed on to consumers. Meanwhile, data on broader activity is likely to point to a gradual economic recovery. Industrial production is expected to rise moderately thanks to front-loading of key export items such as cars and IT products amid US President Trump’s tariff threats. Retail sales are expected to rise as wage conditions improve and foreign tourists flock to Japan.

South Korea: The Bank of Korea meets for a policy decision on Tuesday. As mentioned in our BoK preview, we expect a 25 bp cut. But we believe its forward guidance will be somewhat hawkish. Next Saturday, Korea will release export data for February. We think exports will rebound after contracting in January amid Lunar New Year-related noise in trade figures. We believe semiconductors and cars will lead gains.

China: The data calendar is quite light for China in the final week of February. The People’s Bank of China’s (PBOC) decision on the rate of its medium-term lending facility (MLF) is expected Tuesday. Given the pivot to the 7-day reverse repo rate as the primary policy rate, we don’t expect any change to the MLF this month.

Taiwan: January industrial production data will be published Tuesday. Since most of the Lunar New Year fell in January this year, we expect Taiwan’s industrial production will slow significantly from 20% year on year to around 1.7% YoY. Things should rebound in February. Also, the second estimate for fourth-quarter GDP is out on Wednesday.