Asia week ahead: Rate decisions in Japan, Australia, Indonesia, Taiwan, Philippines
The desk anticipates a pivotal week for Asian monetary policy, particularly focusing on the Bank of Japan's (BoJ) expected 25 basis point hike to 1.0% amidst easing market concerns. Per the full note source, this decision could shift sentiment in the Japanese yen (JPY) as the market expects a potential pause in government bond (JGB) tapering, improving market conditions. Recent consensus from various institutions reflects a median target for USD/JPY at 155.0000 by March 2026, with forecasts ranging from 149.0000 to 160.0000. With inflation rates set to be updated in both Japan and China, traders should closely monitor these movements ahead of the BoJ’s upcoming decision on Tuesday.
What the desk is arguing
The desk frames this as a crucial week for the JPY, influenced heavily by imminent rate decisions from several Asian central banks, especially the BoJ's anticipated rate hike. A substantial development could be the BoJ pausing JGB tapering, as suggested by improving market dynamics, effectively relieving prior pressures on bond yields. The broader implication of these decisions could influence regional currency flows and volatility.
Supporting evidence comes from the expectation that Japan’s inflation data will reveal subdued pressures, suggesting that while the BoJ may opt for a rate increase, broader price stability is the goal. In parallel, the recent market dynamic shifts, with projections hinting that chip and car exports will be strong correlates to growth in Japan’s export figures, further justifying BoJ's cautious approach.
Where it sits in our coverage
Our current consensus target for USD/JPY stands at 155.0000, with a range from 149.0000 to 160.0000. BofA targets 154.0000 for March 2026 as well as Barclays and BNP Paribas, aligning closely with our stance. Notably, this desk’s outlook sits at the lower end of the spread, indicating a more conservative view compared to some optimistic forecasts on the upside.
How other firms see it
Firms like Standard Chartered and Citi are aligned with a slightly higher view, targeting 160.0000 and 155.0000 respectively, reflecting a more bullish sentiment on JPY depreciation. In contrast, firms such as Commerzbank and Nomura present a more skeptical outlook, suggesting potential for more aggressive weakening of the JPY.
The outlook for USD/JPY will be influenced heavily by any shifts from the BoJ or emerging economic trends, such as the inflation dynamics in China and their impact on exporting nations. Additionally, the anticipated trajectory for global interest rates will create direct correlations with JPY volatility.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01BoJ is expected to raise rates by 25 bps to 1.0% next week.
- 02Market consensus for USD/JPY median target is 155.0000 for March 2026.
- 03Inflation data releases from Japan and China may significantly impact FX flows.
- 04Expect potential volatility in JPY as bond yield dynamics settle.
Market implications
Watch for USD/JPY movement, especially if it approaches key resistance levels at 157.0000. The BoJ's policy decision on Tuesday will be critical in determining whether the yen strengthens or continues its recent strike higher against the dollar.
Risks to this view
A significant reversal could occur if inflation in Japan surprises to the upside, prompting a more aggressive policy tightening stance than currently priced in. Additionally, geopolitical tensions or unexpected economic slowdowns in Asia could lead to a flight to safety, impacting the JPY.
Articles Asia week ahead: Rate decisions in Japan, Australia, Indonesia, Taiwan, Philippines 06:13 Asia week ahead Australia China Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Japan, Australia, Indonesia, Taiwan and the Philippines will announce interest rate decisions. Key data releases include inflation updates from China and Japan Deepali Bhargava , Lynn Song and Min Joo Kang Asia Research highlights of the week Our latest views on the major central banks Tech and FX: short-term volatility may cloud long-term trend Asian policy tightening ahead as FX and inflation risks build Philippine rate hike still on track despite softer inflation print China’s second-quarter slowdown underway amid soft consumption China’s reflation trend continues to solidify | Taiwan’s trade boom prompts another growth upgrade | China trade outperforms amid tech boom and US rebound Japan: BOJ to tighten and disclose JGB purchase plans The main event will be the Bank of Japan (BoJ) policy decision on Tuesday. We expect the BoJ to raise its policy rate by 25 bp to 1.0%, in line with market consensus.
The BoJ will also announce its latest Japanese government bond (JGB) purchase plan. It’s a close call, but we expect the BoJ to pause JGB tapering from next April, as market functioning has improved over the past year. A pause could help ease market concerns about further sharp rises in JGB yields.
This would also reduce government concerns about higher market rates and allow the BoJ to focus more on policy-rate decisions. Japan’s May consumer price index should remain subdued thanks to government measures, though price pressures are likely to broaden. Chip and car exports should be the main drivers of export growth in May, while higher energy prices are expected to sharply boost imports.
Australia: RBA to hold rates as downside risks increase We expect the Reserve Bank of Australia to stay on hold on Tuesday, as recent inflation data surprised to the downside. Moreover, the RBA is signalling that policy is in restrictive territory, but not locked into a one‑way tightening path. A noticeable slowdown in growth at recent meetings and a clear upward drift in unemployment suggest the Bank is becoming more alert to downside risks.
Philippines: BSP to hike rates by 25bps amid higher inflation Headline inflation in the Philippines eased as lower transport costs, driven by recent fuel price rollbacks, pulled the headline number down. Food inflation continues to drive overall price gains; it’s becoming increasingly broad‑based beyond rice. Risks to the inflation outlook remain firmly skewed to the upside.
We maintain our forecast for CPI inflation to average 5.8% year-on-year in 2026, well above the 4% Bangko Sentral ng Pilipinas (BSP) target. In this environment, our base case for Thursday’s meeting is that a 25bp rate hike is highly likely. Indonesia: BI to keep rates steady after off-cycle hike Following the recent off-cycle rate hike, we expect Bank Indonesia (BI) to keep policy rates unchanged on Thursday.
Instead, BI is likely to prioritise alternative measures to attract foreign capital inflows and stabilise the rupiah. This approach reflects a delicate balancing act, as the central bank seeks to support currency stability while mitigating downside risks to economic growth. China: Continued economic slowdown expected China releases its key domestic activity data on Tuesday.
We expect further confirmation of a second-quarter slowdown underway. We’re likely to see further deterioration of retail sales and fixed asset investments in May to -0.6% YoY and -2.8% YoY ytd, respectively. We expect industrial production to fare better, growing 4.3% YoY, buoyed by external demand.
The 70-city property prices will also be released on Tuesday. We will learn whether the recent trend of slower declines and price recovery in tier-1 cities continues. Taiwan: CBC to hold, but may open door on future hikes We expect the Central Bank of the Republic of China (CBC) to leave rates steady on Thursday.
However, it will be important to monitor the CBC’s press conference to gauge whether there is any significant shift in tone suggesting a potential rate hike at future meetings. With inflation shooting above the 2% target in May and the prospect of inflation moving further above target in the next few months, we’ve pencilled in a rate hike in the third quarter. Key events in Asia next week Taiwan Philippines Japan Indonesia China Australia 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 Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… 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… Min Joo Kang Senior Economist, South Korea and Japan Min Joo Kang is ING’s senior economist in Seoul covering the South Korean and Japanese economies. Prior to ING, Min Joo worked for Korea’s National Pension Service as Head of Investment… In this article Asia Research highlights of the week Japan: BOJ to tighten and disclose JGB purchase plans Australia: RBA to hold rates as downside risks increase Philippines: BSP to hike rates by 25bps amid higher inflation Indonesia: BI to keep rates steady after off-cycle hike China: Continued economic slowdown expected Taiwan: CBC to hold, but may open door on future hikes
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