Asia Week Ahead: Policy decisions among next week’s data releases

China’s one-year Medium-Term Lending Facility policy rate will be announced next week. We expect a 10bp cut, which should then pass on to a Loan Prime Rate cut the week after of 10bp for the one-year rate and 5bp for the five-year rate. This would be consistent with the monetary policy direction set in the Two Sessions that just passed – to front-load pro-growth policies that will jolt its economy.

Meanwhile, Bank Indonesia (BI) will also meet to discuss policy next week with the central bank widely expected to keep rates unchanged. Despite the pause, we do expect BI to highlight inflation as a growing concern, with a possible shift in tone to prepare markets for a potential reversal in its stance should the ongoing Russia-Ukraine conflict spark inflationary pressures in the coming months.

Similarly, the Bank of Japan (BoJ) is expected to keep its policy rate unchanged. Inflation has gone up rapidly over the past few months, but still remains below the BoJ’s target and lags the global upward trend.

Trade numbers will be out for Indonesia and India, alongside non-oil domestic exports (NODX) for Singapore. Indonesia’s exports and imports should still record strong gains as the economy reopens. More notably, we should see a decent pickup in energy exports for February after a slump in January caused by a temporary export ban for coal. Meanwhile, Singapore’s NODX should sustain the recent streak of expansion, although momentum may begin to slow by March given recent geopolitical developments.

Certain Indian exports are also likely to be a key beneficiary of such developments, such as its agricultural exports, as an alternative source in markets where production has been disrupted. Nonetheless, soaring commodity prices may weigh on its overall export numbers due to rising input costs for manufacturers. As it stands, India still remains on pace to exceed its annual export target of US$400bn.

China will release activity data next week. We expect fairly weak retail sales growth in the first two months of the year, mainly from bonus cuts and strict Covid measures. Industrial production could be softer, with impacts from supply chain disruption and chip shortages. Fixed asset investment growth could be stable, and more growth is expected in the coming months after the Two Sessions highlighted the importance of infrastructure spending to economic growth.

We will see Australian labour figures out next week. We expect the easing of Covid-related labour shortages to be reflected by a slightly quicker pace of employment gains (mainly full-time) compared to last month, although unemployment and participation rates should remain unchanged for the time being. Business sentiment has picked up considerably after disruptions posed by the Omicron surge faded, with a pickup in business activity concurrently with more workers seeking employment in a tight labour market.

In South Korea, the unemployment rate should go down a bit despite the recent Covid surge, as the government continued to ease social distancing measures during the month.

Price surges for basic commodities like crude and edible oils should predominantly keep prices elevated for Indian consumers through a rise in food prices, which compose almost half of its CPI basket, and is unlikely to abate in the immediate term as some food crops are used for ethanol production (to then be used as substitutes for petroleum). Consumers should also see elevated transportation prices (the third biggest component of the CPI basket) as a consequence of rising oil prices. All in all, we see inflation risks skewed to the upside (February year-on-year CPI consensus: 5.9%, ING: 6.4%).