Asia Week Ahead: Rate Decisions In Japan, Taiwan, Indonesia And Key Chinese Data

By Deepali Bhargava, Lynn Song and Min Joo Kang of ING Economics

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The central banks of Japan, Taiwan, and Indonesia are all expected to hold rates steady. Key data releases include Chinese retail sales and industrial production, and Japanese inflation.

Japan: BoJ to leave rates unchanged amid weak exports

US tariffs are expected to result in another month of export declines in Japan in August. Imports may decline due to lower global commodity prices. Continued weak exports are likely to prompt the Bank of Japan to maintain its 0.5% policy rate on Friday. The BoJ still needs time to assess the impact of the US-Japan trade deal. Consumer price inflation is expected to ease to 2.9% year-over-year in August, thanks to last year's high base. But core inflation, excluding fresh food and energy, should stay above 3%, supporting a potential BoJ rate hike in October. No hawkish remarks are anticipated from Governor Ueda, given Japan's fluid political climate

Taiwan: Central bank expected to stand pat

Taiwan’s central bank will hold its monetary policy steady at Thursday’s meeting. Inflation has been below the 2% target since May. Despite the softening of the TWD over the past two months, following an earlier rally, depreciation pressure does not appear to be a major factor at this time. Yet growth continues to surprise on the strong side amid solid external demand. There isn’t a strong domestic case to pre-empt the Federal Reserve in cutting rates. Even in the event of a no-action decision, markets will watch to see if policymakers hint at a December rate cut.

Indonesia: BI expected to hold the policy rate

We expect Bank Indonesia will leave its policy rate unchanged at 5% on Wednesday. The recent cabinet changes, including the replacement of Finance Minister Sri Mulyani, risk a wider fiscal deficit. The new finance minister will look to recast next year's spending plans. We think BI would look for some clarity on fiscal expansion before making the next rate move. With softer inflation prints helping real policy rates stay high -- close to 3.4% -- we continue to expect BI to deliver another 50bp of rate cuts by the first quarter of 2026.

China: Retail sales seen recovering, as IP and FAI drop moderately

China’s monthly data dump is scheduled for Monday, when it releases key activity figures for August. We expect a recovery in retail sales growth on the month to 4.0% year on year, but for industrial production and fixed-asset investment to continue to moderate, dropping 5.6% YoY and 1.5% YoY ytd, respectively. Data on 70-city housing prices should confirm that momentum has been turning downward in the past few months. Poor weather conditions were commonly attributed as a main factor behind the weak July data. So, August will be an important gauge of whether the slowdown was a blip or the start of a trend.

Key events in Asia next week

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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 ...

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