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Asian Focus: Japan trade deficit woes; China rate cut by week end
In this Asian Focus video Andrew Robinson, Correspondent for Saxo Capital Markets in Singapore reviews trade data out of Japan, property price development in China and rumours of rate cuts in the region. He also touches on the rate cut outlook in Australia and the importance of first quarter inflation data.
New home prices in China fell in March and the decline looks set to steadily continue. There is evidence however that the housing market is actually deflating rather than imploding, which is the greatest fear, says Andrew. This means that the desired results of restrictions on development seem to be bearing fruit, says Andrew. He however does not see an end to the restrictions ahead but rather a bit more flexibility for developers. This alone will not prove enough for an interest rate cut, though rumours have been rife in the last few days about this and upcoming reserve requirement ratio cuts. Andrew would not be surprised if an interest rate cut came already by the end of this week.
In March, Japan’s trade balance moved back into deficit mode after a short-lived surplus in February. Despite the slide though there was a surprise on the export side with a 5.9 percent annual increase, largely driven by car sales to the US. Of most concern though was the fact that it was the second month of decline in exports to China, Japan’s biggest trading partner. Also of concern is the continued high level of imports, heavily affected by the need to buy oil and gas to replace lost nuclear energy production. All in all, Andrew sees Japan’s trade deficit continuing for a few more months.
Concerning the Bank of Japan it is expected to remain on the path of extended asset purchase and to apply easing measures in the coming months, according to Andrew. Such measures are expected already by the market at the bank’s next meeting on April 27.
Further south in the region, the Reserve Bank of Australia released a “no-surprise” minutes from its last meeting. Nevertheless, the likelihood of a 25 basis point rate cut at the bank’s next meeting is 94 percent, making it pretty much a done deal, says Andrew. Furthermore, the market is already pricing in a similar cut at the next meeting again. Of key interest however for the future path of interest rates in Australia is consumer price index data for the first quarter, to be released early next week.
rates in Australia is consumer price index data for the first quarter, to be released early next week.
See more of Andrew's Asian market commentary on TradingFloor.com
05:50 minutes
Tags: andrew robinson, australia, boj, central banks, china, forex, macro, property prices, rates, rba, rrr, trade balance, tradingfloor.com, yvette roper