Asia Week Ahead: Key Data From Indonesia, China, Japan, And South Korea

Data highlights include Indonesia’s CPI inflation, China’s purchasing managers’ index, South Korea’s exports and Japan’s Tankan survey. Also, the People’s Bank of China will conduct a new overnight reverse repo operation.

Indonesia: Inflation expected to rise further

We expect Indonesia’s CPI inflation to edge slightly higher, driven by second-round effects amid elevated oil prices and IDR depreciation. The data will offer insights into the extent to which higher energy costs are feeding through to domestic prices. Nonetheless, the impact is likely to be contained, with inflation remaining within Bank Indonesia’s target range.

China: New PBOC repo operation and industrial data

China releases the May industrial profits data on Saturday. During the week, we'll get June purchasing managers’ index data. Industrial profits have been recovering this year, driven by the computer, communications and electronic equipment and mining sectors. We expect the uneven recovery in profit growth to continue, with sectors supported by the tech boom gaining while other areas remain relatively soft. We’re looking for the official PMI data to hover near the 50-threshold separating expansion and contraction. The manufacturing PMI is expected to edge up 0.1pp to 50.1, while the non-manufacturing PMI may slide back into contraction territory at 49.9. Momentum has been lacklustre in the second quarter. PMI data will give us a first look at whether a June rebound could be in the cards.

The People’s Bank of China is set to conduct a new overnight reverse repurchase operation next Monday. The interest rate it sets will be watched closely by markets. This is in line with recent policy signalling, suggesting we’ll eventually see the PBOC move its benchmark rate from its current 7-day reverse repo rate to an overnight reverse repo rate. The aim would be to better align policy tools with those of global peers and to improve the transmission of monetary policy.

South Korea: Exports and industrial production to rebound

Strong chip demand should support South Korean exports and industrial production. We expect exports to surge more than 60%, and industrial production to rebound after a temporary drop in April. Easing geopolitical tensions should also give the manufacturing PMI a lift. Inflation is expected to accelerate further as the second-round effects from higher oil prices become more visible. The recent decline of global oil prices won’t be reflected in domestic gasoline prices for another couple of months, while petrochemicals and related product prices are likely to remain sticky.

Japan: Stronger Tankan survey expected despite energy shock

Japan’s monthly activity data is likely to contract in May as energy shocks interrupt production activities and reduce petrol consumption. However, we think survey data should improve, signalling the recovery of activity in the coming quarter. The Bank of Japan’s Tankan survey is expected to show an increase amid strong chip demand and an improved situation in the Middle East. PMI surveys for both manufacturing and services are likely to advance.

Key events in Asia next week