THAILAND: BoT Sees Significant Risks To Growth From Trade Policies
The Bank of Thailand (BoT) cut rates 25bp to 1.75% as expected in a 5 to 2 vote. The move was driven by a lower growth outlook with risks skewed to the downside, tight financial conditions and inflation expected to stay below the bottom of the 1-3% band. It reiterated the need for structural reforms saying that “a combination of complementary policies to enhance” competitiveness would be required.
- The two dissenting members voted for no change to retain policy space so that the timing of easing could be optimised.
- Thailand’s growth in 2025 has been revised down even under a best case scenario driven by the trade and tourism sectors, as global growth slows. Previously BoT expected Thai growth to be around 2.5% but if US tariffs stay close to where they are now it believes growth will be about 2%. If they are higher though, BoT estimates only 1.3% in 2025.
- Given heightened uncertainty, it will continue to monitor trade developments globally (including retaliation to US policy) but also financial markets and the baht, which have been functioning normally.
- Headline inflation is projected to be below 1% due to government subsidies and lower global oil prices. Core though should be steady – it printed at 0.9% y/y in March.
- As financial conditions tightened, lending growth and credit quality deteriorated and BoT will monitor the impact of global trade disruption on vulnerable households and businesses.
- See press release here.
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JAPAN DATA: Tankan Suggests Resilience, But Tariff/Trade Impact Likely
The chart below plots the Tankan results for manufacturing (the white line), along with non-manufacturing (or services, the green line) and y/y Japan real GDP growth. Manufacturing ticked lower but is just off recent highs. For the non-manufacturing index, we hit fresh highs back to the early 1990s. This is likely to give the authorities/BoJ some comfort around broader macro conditions, particularly with so much off uncertainty.
- The manufacturing outlook was also better than forecast at +12 and only slightly sub Q4's +13 read. Still a BoJ official noted that most firms likely responded before the recent US auto tariff announcement (per RTRS). This tempers the resilient results to a degree.
- Smaller firm results were generally firmer than forecast, but non-manufacturing firms have much higher outright levels relative to manufacturing.
- On the capex side, the large all industry capex estimate at 3.1% was very close to forecasts but down from the prior +11.3% pace. This arguably won't be a huge surprise, with other indicators of capex coming off in recent months.
- The second chart below takes this capex estimate and plots it against the total capex (ex software) series in y/y terms, which is the orange line on the chart.
Fig 1: Tankan Sentiment & Japan GDP Growth
Source: MNI - Market News/Bloomberg
Fig 2: Japan Tankan Capex Intentions & Actual Capital Spending (ex Software) Y/Y
Source: MNI - Market News/Bloomberg
US TSYS: Cash Bonds Slightly Cheaper After Yesterday's Modest Gains
TYM5 is 111-12, +0-05+ from closing levels in today's Asia-Pac session.
- According to MNI's technicals team, TYM5 remains well off the initial technical resistance of 111-22.5 (today's intraday high) -- next resistance above at 112-01 (High Mar 4 and a bull trigger).
- Cash US tsys are slightly cheaper in today’s Asia-Pac session after yesterday’s modest gains.
- Month/quarter-end rebalancing flow tempered Monday morning's risk-off support ahead of Wednesday's US tariff deadline.
- Little new from Fed speakers Williams and Barkin: "need an open mind how long tariff impacts last" Williams said, while "to cut rates, got to have confidence on inflation".
- From our latest US Treasury Deep Dive - the Treasury isn’t expected to raise the size of its coupon offerings until Q4 2025 at the earliest, with consensus on such a shift moving following the February refunding announcement to Nov 2025/early 2026, from Aug/Nov 2025 prior.
MNI: AUSTRALIA FEB RETAIL SALES +0.2% M/M
- MNI: AUSTRALIA FEB RETAIL SALES +0.2% M/M
