MNI ASIA PAC Weekly Macro Wrap:

MNI (SYDNEY) - Executive Summary:

• JAPAN
• The BoJ left rates on hold as expected at 0.25% and the statement appears to contain few surprises. There was a dissent from board member Tamura, who was in favour of a 25bps hike. Ueda’s press conference didn’t give a sense of urgency around raising rates in Q1 next year.
• Yen slumped post the meeting and press conference (with a hawkish Fed also weighing on the yen). Verbal rhetoric around yen weakness has subsequently picked from Japan authorities. 
   
• AUSTRALIA
• The government deficit in FY25 was revised slightly lower in the mid-year outlook but remains at 1% of GDP. However, the subsequent years are showing a worse deficit trajectory and as a result higher debt ratios. Public demand has been revised up but Treasury’s projections remain materially below the RBA’s.
• Westpac consumer confidence fell 2% to 92.8 in December, driven by forward-looking components, after rising 5.3%. Through the volatility the Q4 average is up 9.9% q/q.
   
• NEW ZEALAND
• Q3 NZ GDP was a lot weaker than expected and signalled that the economy is in a technical recession. Production-based GDP fell 1% q/q after a downwardly-revised Q2 at -1.1% leaving the annual rate 1.5% y/y lower. Expenditure GDP fell 0.8% q/q in both Q2 and Q3 to be down 1% y/y. The significant undershoot of the RBNZ’s forecasts is likely to mean another 50bp of easing on February 19.
• In contrast, the December ANZ business survey was more optimistic and suggested that growth should begin to recover in Q4 with the outlook improving. However, price and cost measures were either steady or higher, which will be monitored.
• NZ Treasury revised down its growth expectations for the current financial year and it is then forecast to slow from FY27 to 2.4% due to limits on the supply side, especially from soft labour productivity (which was revised down). 
   
• CHINA
• November activity data were mixed with IP close to expectations but retail sales significantly undershooting. Housing-related data remained weak. As expected, the China loan prime rates were left unchanged.
• There also appeared to be some pushback against the sharp drop in yields since the start of the month, while the yuan defence continued.
• Reuters reported that China’s growth target for 2025 is likely to be around 5%, but with a wider fiscal deficit of 4% of GDP. 
   
• ASIA
• BI left rates unchanged in December. It continues to focus on FX stability and the Governor said that it wasn’t the right time to continue cutting rates. USDIDR rose further following the more hawkish Fed.
• BoT was also on hold but it is prepared to “adjust rates”. It kept its 2025 growth forecast unchanged at 2.9% but revised headline inflation down 0.1pp to 1.1%. Household debt remains a concern.
• The BSP cut rates as expected, while the CBC in Taiwan left rates on hold. 
   
• ASIA EQUITY FLOWS
• Taiwan saw sharp outflows post the hawkish Fed cut.  

PLEASE FIND THE FULL REPORT HERE: weekly macro round up (December 20 2024) .pdf