Asian Markets Await Japanese Inflation Data Amid Volatile Week
Investors in Asia are closely eyeing the latest Japanese consumer inflation figures on Friday, seeking potential support after a turbulent week in the markets. Following a strong rise in global markets the previous day, hopes are high for a positive end to what has been a challenging week for investors across the region.
The MSCI Asia Pacific ex-Japan index has experienced a 3.7% decline this week, marking its most significant weekly loss since August. Even Japan’s Nikkei, which soared 6.6% higher last week in its best performance in nearly two years, finds itself in the red, albeit marginally.
A soft inflation number from Japan could serve as a catalyst for a Friday buying spree, especially if it raises doubts about the Bank of Japan’s (BOJ) policy normalization and eventual move toward positive interest rates.
Japan’s annual headline inflation rate surpassed the BOJ’s 2% target in April 2022. In addition, it has been 2 years, that Japan has maintained that annual rate to the same. However, the recent decline from its peak of 4.3% a year ago has been a bit slow in growth since November.
In addition, the continued decline in December’s inflation figures can cause a serious discussion about price pressures, which will rise. Due to the situation, many investors and businessmen have questioned the speed at which the BOJ will normalize policy and have interest rate which will have a positive impact on the market and the business, especially investors.
Economists are anticipating that annual core inflation will cool to 2.3% from 2.5%, marking its lowest level since June 2022.
The recent weakening of the yen, spurred by weaker-than-expected machinery orders and dovish comments from BOJ Governor Kazuo Ueda, has also been observed. It is down 5% so far this month, heading towards its most substantial monthly decline since June 2022.
Despite the prevailing uncertainties, risk assets saw a rebound on Thursday following a period of significant losses. This rebound was fueled by a slowdown in the recent surge in global bond yields and renewed optimism surrounding AI technology, particularly boosting tech stocks.
Key developments expected to provide further direction to markets on Friday include Japan’s inflation data for December, New Zealand’s PMI figures for December, and Malaysia’s trade data for the same month.
As investors brace for the release of crucial economic indicators, market sentiment remains cautious yet hopeful for a turnaround amid the ongoing volatility in global markets.
