Morning Bid: Count down to Japan’s date with destiny

By Thomson Reuters Mar 13, 2024 | 4:47 PM

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

A day of consolidation and narrow range-trading across world stocks on Wednesday gives Asian markets no clear direction on Thursday, allowing investors to gear up for next week’s potentially seismic Bank of Japan policy meeting.

The main event in Asia’s economic calendar on Thursday is the release of Indian wholesale price inflation. This comes a day after figures showed annual consumer inflation was marginally hotter than expected in February, although industrial production fell short of expectations.

Inflationary pressures, as measured by wholesale prices, remain muted. The last time annual wholesale price inflation was above 1% was almost a year ago, and prices were declining outright between April and October last year.

Economists polled by Reuters expect annual WPI inflation to inch lower to 0.25%.

Developments in Tokyo, meanwhile, suggest momentum is building toward the BOJ raising interest rates next Wednesday. This would end negative interest rate policy that has been in place for eight years, and would be the first rate hike in 14 years.

Sources have told Reuters that the BOJ will debate raising rates if a preliminary survey on Friday on big firms’ wage talks, to be released by union umbrella Rengo, is positive.

Sustainable wage growth is seen as a key plank of ensuring Japan’s decades-long battle with deflation is over.

On Wednesday, car giant Toyota Motor agreed to give factory workers their biggest pay increase in 25 years, heightening expectations that bumper pay raises will be matched elsewhere, giving the BOJ the green light to move.

A head of steam appears to be building. Representatives of government, labor and management held a tripartite meeting on Wednesday to push wage hikes across the country, and according to union sources, progress was made.

Japanese stocks fell a mild 0.26% on Wednesday as the profit-taking from last week’s record high continued. It was the fourth decline out of the last five sessions, suggesting traders may also be bracing for a BOJ move.

The two-year JGB yield edged back above 0.20%, although the yen hardly moved.

Meanwhile, fraught U.S.-Sino relations over trade, tech and spying took another twist on Wednesday after U.S. House of Representatives passed a bill that would give TikTok’s Chinese owner ByteDance about six months to divest the U.S. assets of the short-video app, or face a ban.

U.S. President Joe Biden said he wants the Senate to take give swift approval.

The measure is the latest in a series of moves in Washington to respond to U.S. national security concerns about China, from connected vehicles to advanced artificial intelligence chips to cranes at U.S. ports.

Elsewhere in Asia on Thursday, investors also await retail sales data from Indonesia, and industrial production and producer prices from Hong Kong.

Here are key developments that could provide more direction to markets on Thursday:

– India wholesale price inflation (February)

– Indonesia retail sales (February)

– Hong Kong producer price inflation (February)

(By Jamie McGeever; Editing by Josie Kao)