A calmer atmosphere prevailed in global markets today, with the US dollar and bond yields softening, as well as stock prices stabilizing, giving a positive tone to Asian markets this Friday. Significant political and economic developments are drawing investors’ attention to Japan.
Sunday’s general election could tip the balance of power in Japan’s parliament. Recent opinion polls suggest the current ruling coalition may lose its majority, impacting the Bank of Japan’s ability to smoothly transition from near-zero interest rates.
Tokyo’s consumer inflation data, an early indicator of national price trends, will be released this Friday. The key economic indicator is expected to fall below the Bank of Japan’s 2% target for the first time in five months. The expected annual rate of 1.7% is down from September’s 2.0% rise and the first deviation from target since May.
In this context, a senior official from the International Monetary Fund (IMF) suggested that further interest rate increases in Japan should be gradual. IMF Asia and Pacific Director Krishna Srinivasan highlighted the potential ripple effects of the Bank of Japan’s policy changes on global financial markets, especially given the important positions Japanese investors hold in other countries. .
Srinivasan also noted that many central banks in Asia may have an opportunity to cut interest rates, especially as the United States begins monetary easing, which eases concerns about currency depreciation.
The Japanese yen showed a remarkable recovery today, posting its biggest gain in a month. This caused the dollar to fall to 151.50 yen from Wednesday’s three-month high of more than 153.00 yen. Despite the recent weakness in the yen, foreign investors have been attracted to the Japanese market, with stocks being bought for four consecutive weeks through October 19th. However, there is a growing sense of caution as elections and corporate financial results are scheduled to be announced.
Despite a rebound in the yen and an influx of foreign capital, the index entered Friday trading down more than 2% for the week.
In other regional news, Singapore is set to release its industrial production statistics for September. The forecast says growth will slow significantly to 3.5% year-on-year, in contrast to August’s 21% increase, which was the highest since 2021 and the strongest growth in 15 years.
Friday’s economic calendar also includes Tokyo CPI inflation data for October and Japan services PPI inflation data for September, along with Singapore’s industrial production statistics. These developments are expected to provide further guidance to the market.
Reuters contributed to this article.
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