Asia week ahead: Indonesia rate call, data on China, Taiwan, Japan
Per the full note , Bank Indonesia is expected to hold rates at 5.75% on Wednesday, with the central bank balancing rupiah stability against growth support. The desk highlights BI's growing reliance on non-rate tools like SRBI yields and FX intervention rather than a hike, especially with incoming Acting Governor Destry Damayanti likely to signal continuity. In China, July activity data due Monday are expected to remain sluggish, with retail sales at a weak 1.7% YoY and fixed asset investment slowing to -6.3% YoY ytd. The LPR decision follows on Tuesday, with markets watching for any easing signals. The week also brings Japan's GDP and inflation figures, Taiwan's export orders, and Singapore's NODX, all of which could sway regional currency sentiment.
What the desk is arguing
The desk at ING argues Bank Indonesia will hold its benchmark rate at 5.75% at Wednesday's meeting. The July hold showed policymakers are prioritizing rupiah stability while favoring non-rate tools such as SRBI yields and FX intervention over immediate hikes. The ongoing leadership transition to Acting Governor Destry Damayanti further reduces the odds of an August move.
The note points to China's July activity data weakness, with retail sales expected to rebound modestly to 1.7% YoY but FAI softening to -6.3% YoY ytd. Industrial production is seen outperforming at 5.0% YoY. Following the Politburo's emphasis on accelerating fiscal spending, the desk sees potential for investment recovery in coming months.
The implicit alternative read would be a BI hike to defend the rupiah amid external pressures. However, the desk downplays this, citing BI's demonstrated preference for non-rate measures and the desire for policy continuity during the leadership transition.
Key takeaways
- 01Bank Indonesia expected to hold rates at 5.75% at Wednesday's meeting.
- 02BI prioritizes rupiah stability but uses non-rate tools like SRBI and intervention.
- 03China's July activity data due Monday likely to show sluggish retail sales and investment.
- 04LPR decision and Japan's GDP/inflation data in focus for Asian FX.
Market implications
Watch USD/IDR for a potential test of recent highs if BI disappoints hawks. China's activity data and LPR decision will color Asian FX risk appetite. Japan's GDP and inflation figures could trigger USD/JPY volatility if they diverge from BOJ expectations.
Risks to this view
A surprise BI hike would upend the carry trade and could sharply strengthen the IDR. Chinese activity data coming in much weaker than forecast could weigh on regional growth-sensitive currencies. Political surprises in Indonesia's leadership transition could undermine policy credibility.
Articles Asia week ahead: Indonesia rate call, data on China, Taiwan, Japan Published 03:05 Asia week ahead China India Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Bank Indonesia’s rate decision is the highlight of the week, followed by a loan prime rate announcement in China. Key data releases include China's economic activity, Taiwan's export orders, Japan's GDP and inflation, India's trade and FX reserves and Singapore's non-oil domestic exports Lynn Song Asia Research highlights of the week China’s trade growth surged amid strong external demand Is China’s reflation trend running out of steam? Indonesia: BI expected to hold rates at 5.75% We expect Bank Indonesia to hold the benchmark rate at 5.75% on Wednesday .
BI’s unexpected July hold showed that policymakers are increasingly balancing rupiah stability against the need to support growth. While exchange-rate stability remains the main priority, BI appears more willing to use non-rate tools, including Bank Indonesia Rupiah Securities (SRBI) yields and FX intervention, rather than raising borrowing costs immediately. The ongoing BI leadership transition also lowers the probability of an August move, as Acting Governor Destry Damayanti is likely to use her first meeting to signal continuity rather than deliver a surprise hike.
China: July activity data and LPR decision in focus China releases its key domestic activity data for July on Monday. We expect sluggish momentum to persist after the weak PMI readings earlier this month. We expect a modest rebound, but retail sales should remain weak at 1.7% year-on-year.
Fixed asset investment is likely to slow further to -6.3% YoY ytd, while industrial production continues to outperform, moderating to 5.0% YoY. Following July’s Politburo meeting, which emphasised accelerating fiscal spending and the deployment of bond proceeds, investment activity could begin to recover in the coming months. This, however, won’t show up in the July data yet.
The 70-city property prices will be released on Monday. We are watching for signs that the recent stabilisation of prices in tier 1 and 2 cities can be sustained. On Thursday, China will announce its decision on loan prime rates.
No change is expected, with the 1-year and 5-year rates remaining unchanged at 3.0% and 3.5%, respectively. Taiwan: Export orders growth set to accelerate Taiwan releases export orders data on Thursday. We expect growth to accelerate further to 67.5% YoY amid strong orders from tech subsectors continuing to drive overall export orders.
Japan: GDP and inflation data in focus Market consensus is for Japan’s preliminary Q2 GDP, due on 17 August, to remain unchanged at 0.5% quarter-on-quarter, seasonally adjusted. Private consumption is expected to remain the main engine of growth. Japan releases its headline and core CPI on 21 August.
The market expects a moderate increase to 2.0% YoY and 1.8% YoY, respectively. The projected acceleration in headline inflation would bring the national print back to the BOJ’s 2% target for the first time in recent months, driven primarily by persistent import price pressures. India: Trade and FX reserves data India releases its import and export data on Monday.
On the external buffer side, FX reserves for the week of 14 August are due on Friday. Singapore: Non-oil domestic exports remain in focus Singapore's July non-oil domestic exports are due on 17 August. The prior increase for June came in at 20.7% YoY, a notable deceleration from May’s 38.4% increase.
Key events in Asia next week Taiwan Singapore Japan Indonesia India China Asia Pacific Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China.
Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong… In this article Asia Research highlights of the week Indonesia: BI expected to hold rates at 5.75% China: July activity data and LPR decision in focus Taiwan: Export orders growth set to accelerate Japan: GDP and inflation data in focus India: Trade and FX reserves data Singapore: Non-oil domestic exports remain in focus
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