Asia week ahead: Rate decisions in Japan and Singapore, data on China and Taiwan
In the upcoming week, the primary focus will be on monetary policy decisions in Japan and Singapore, with both central banks likely to maintain their current rates. Per the full note source, the Bank of Japan is set to keep its policy rate unchanged at 1.0%, reflecting stability in economic and inflation forecasts. Likewise, the Monetary Authority of Singapore is expected to remain on hold despite resilient economic growth and gradual increases in core inflation. Notably, market participants will also be attentive to economic data releases from China, particularly the July PMIs and industrial profits, which could indicate broader trends in regional economic health.
What the desk is arguing
The desk interprets the upcoming monetary policy decisions as a sign of continuity in the face of evolving economic indicators in Japan and Singapore. The Bank of Japan’s expected decision to maintain its rate at 1.0% suggests confidence in the current inflation trajectory, reducing the pressure for immediate action. This perspective is echoed in the source commentary which states that there appears to be little urgency for further adjustments at this stage.
In Singapore, a similar sentiment prevails as the Monetary Authority is projected to hold steady, with core inflation figures surprising analysts to the downside. This could afford the MAS additional time to assess economic conditions before making any tightening moves. The desk notes that in Japan, inflation is being monitored closely, but the domestic consumption trends are not presenting a compelling case for immediate policy revisions.
Where it sits in our coverage
Our consensus target for USD/JPY currently stands at 1.075, with a range between 1.04 and 1.12. Specific firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's interpretation aligns with the broader market consensus indicating a stable outlook for these currencies. However, the absence of a hawkish stance from monetary authorities suggests that any upward surprises in inflation could prompt shifts in this sentiment.
How other firms see it
Most firms are aligned with the desk's view of stability in Japan and Singapore, anticipating no immediate rate changes. However, some notable discrepancies exist, with firms like bofa leaning towards more conservative forecasts. These variations may arise from differing assessments of inflation trends within these regions.
Relatedly, traders should watch USD/JPY closely for potential spillover effects as global sentiment shifts alongside the Bank of Japan’s decisions. This interaction can create volatility that may influence strategies in related pairs.
What the calendar says
Looking ahead, the release of China's July PMI data this Friday will be crucial, particularly given its implications for trade and export forecasts. As these indicators unfold, market movement could be influenced by shifts in sentiment toward regional economic stability.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Bank of Japan expected to maintain the rate at 1.0% reflecting confidence in inflation forecasts.
- 02Monetary Authority of Singapore likely to defer tightening despite resilient growth and gradual core inflation increases.
- 03China's economic data, particularly PMI and industrial profits, will be critical in assessing broader regional trends.
- 04The market awaits signals that might necessitate shifts in the current stable policy outlook.
Market implications
Traders should closely monitor the July PMI data from China as it could significantly affect sentiment in USD/JPY and related pairs. A deviation from expected numbers may create volatility and prompt reassessments of the monetary outlook in both Japan and Singapore.
Risks to this view
A sharp upward movement in inflation in Japan or unexpected hawkish signals from the MAS could force a reevaluation of the current policy stance. Such developments would likely lead to adjustments in currency positioning as traders respond to new monetary conditions.
Articles Asia week ahead: Rate decisions in Japan and Singapore, data on China and Taiwan Published 05:03 Asia week ahead China Japan Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Monetary policy in both Singapore and Japan is expected to remain unchanged. Markets will also focus on China's PMI and upcoming Politburo meeting and Taiwan's second-quarter GDP data Deepali Bhargava , Lynn Song and Min Joo Kang Asia Research highlights of the week Bank Indonesia keeps rates on hold, signals greater support for growth Japan: BoJ to hold rates at 1.0% We expect the Bank of Japan to keep its policy rate unchanged at 1.0% on Friday. With the economic and inflation outlook broadly evolving as expected, there appears to be little urgency for further policy adjustment at this stage.
Singapore: MAS expected to stay on hold We don’t expect the Monetary Authority of Singapore to tighten monetary policy on Monday. This is despite the continued resilience of economic growth and rising risks stemming from higher oil prices. So far, the pickup in core inflation has been gradual, with recent readings consistently surprising the market to the downside.
In our view, the measured increase in core inflation provides the central bank with sufficient room to defer any policy tightening until October. China: PMI and Politburo meeting in focus China releases its industrial profits data for the first half of the year on Monday. Profits have been on a recovery trend so far this year, buoyed by hi-tech and export-facing industries.
With June industrial data coming in stronger than expectations, this positive trend could continue. China also releases its official July PMI data on Friday. We’re looking for the manufacturing PMI to cool slightly to 50.1, and non-manufacturing PMI to slow to 50.0 on the month.
The Politburo is expected to hold a meeting to review the economic outlook and set priorities for the remainder of the year. Taiwan: Double-digit GDP growth expected in 2Q26 Taiwan’s main data release is second-quarter GDP, out on Friday. Given the strength of the monthly data, we believe there's a compelling case for growth to remain in the double-digit range.
We’re looking for GDP growth of 12.1% year-on-year, once again driven primarily by net exports, which rose 38.5% YoY to $44.5bn in the second quarter. Key events in Asia next week Taiwan Singapore Japan 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.
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