Asia Week Ahead: Central Banks Decide On Policy Next Week

By Min Joo Kang, Iris Pang and Nicholas Mapa of ING Economics

Friday, May 19, 2023 11:08 PM EDT

Service led growth to remain robust in Japan

Flash PMI and core machinery orders data will confirm that service-led growth is continuing in Japan despite weak manufacturing activity. This trend should also be reflected in prices, with core inflation excluding food and energy rising faster than headline inflation.

Sentiment to remain sluggish in Korea

Consumer and business surveys are expected to show that sentiment has improved from the recent dip, but overall sentiment indices should remain sluggish. Meanwhile, the Bank of Korea will meet next Thursday but no action is expected as inflation continues to slow.

Chinese banks to keep Loan Prime Rates unchanged

Chinese banks should decide to maintain both the 1Y and 5Y Loan Prime Rates on Monday, which are currently at 3.65% and 4.3%, respectively. We expect banks to hold because the People's Bank of China (PBoC) has opted to maintain policy rates. The PBoC has also said that we could see higher CPI inflation in the near term.

Weak demand for semiconductor chips to weigh on Taiwan’s economy

Taiwan export orders and industrial production should show a more than 10% year-on-year contraction in April given the still weak demand for semiconductor chips. The current situation might not improve materially until demand for new models of US smartphones exceeds current production expectations. This is quite unlikely as the US economy is weakening.

Bank Indonesia set to extend pause

Bank Indonesia will likely keep policy rates untouched next week. Fading price pressures have allowed the central bank to extend its pause, keeping rates at 5.75% since January. Renewed pressure on the Indonesian rupiah, however, could mean that the central bank will need to hold off on rate hikes for now to ensure FX stability.

Soft industrial production in Singapore

Industrial production will be reported next week, and we expect sluggish exports to weigh on output for at least another month. Industrial production has largely tracked the downturn in non-oil domestic exports and the sustained slump for electronics and petrochemicals should result in another month of soft industrial production as well.

Key events in Asia next week

Refinitiv, ING

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.

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