MNI ASIA PAC Weekly Macro Wrap:

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Executive Summary:

JAPAN 

• BoJ Board Member Asada has given an interview with Sankei, noting a BoJ rate hike could lead to an economic slowdown. Asada voted against the June rate hike by the BoJ. Japan May labour cash earnings were a touch below forecasts, but still suggested positive trends. The PPI y/y rose to fresh highs since 2023, while imported inflation neared 30%y/y. Japan assets also received late week support, as the FinMin called on pension funds to invest more at home. 

AUSTRALIA 

• The June Melbourne Institute inflation gauge moderated to 3.9% y/y from 4.4% falling 0.4% m/m, the lowest annual rate since February (before the onset of the Iran War).

NEW ZEALAND

• In a unanimous decision, the MPC decided to hike rates 25bp to 2.5%, in line with Bloomberg consensus - first tightening since May 2023. It decided that it was “appropriate” to remove some accommodation to return inflation to the 2% band mid-point.
• The BNZ manufacturing PMI jumped to 59.7 in June from an upwardly revised 51.3 (from 49.9) in May, the highest since the pandemic-impacted July 2021. This data release is consistent with the RBNZ’s view that the recovery has been stronger than expected.

SHORT TERM RATES 

• Interest-rate expectations through December 2026 were little changed across the $-bloc over the past week except for New Zealand, which is 15bps firmer.

CHINA 

• China's June PPI expanded again in June, reaching +4.1% YoY (prior +3.9%). Paradoxically, China's June CPI was down in May at +1.0% (prior +1.2%) YoY. The decline in CPI could suggest that the excessive, unsustainable competition 

SOUTH KOREA 

• South Korean equity market volatility remains a focus point for local and global investors. The BoK looks set to hike next week, but the move is widely expected. USD/KRW has moved off recent highs, aided by expected inflows from the SK Hynix US ADR. 

ASIA 

• Bank Indonesia’s consumer confidence measure fell to 117.8 in June, lowest since September, after 120.9 in May and 127.0 in January. Q2 average consumer confidence implies that household consumption growth may slow towards 5% after it picked up to 5.5% in Q1.
• The Bank of Thailand June Minutes reinforced its on hold outlook for the next few months. The BoT did upgrade its growth outlook, but still expects an uneven recovery.
• Whilst Philippines CPI is off its April highs, June's moderation from May sees inflation stubbornly above the BSP target range of 2-4%. There is no July meeting for the BSP and the next meeting to decide monetary policy is 27 August.

ASIA EQUITY FLOWS 

• South Korean outflows have stalled, while in SEA, Indonesia remains a laggard compared to better trends elsewhere.