Asian Markets Focus on Inflation Data as BoJ Keeps Hike Options Open

Asia's markets are starting the week with inflation data in focus as China and Japan release key figures. In China, consumer inflation eased to 0.5% in July, while producer inflation slowed to 3.5%, indicating a decrease in price pressures.

In Japan, minutes from the Bank of Japan's recent meeting showed policymakers believe inflation is trending towards 2% and that further rate hikes are still possible, although some argued for pausing to assess the impact of previous moves.

India's inflation report is expected to come out around 4.4% for July, while Singapore will revise its second-quarter growth figures. Japan's producer prices and other regional trade-price and wholesale-inflation updates will also provide insight into whether recent energy costs, currency fluctuations, and import prices are influencing broader inflation.

The Bank of Japan's comments on further rate hikes can have ripple effects beyond Japanese bonds, as higher government bond yields can support the yen and impact 'carry' trades that borrow in yen to buy higher-yielding assets elsewhere. This can lead to quick moves in USD/JPY, affect yen-sensitive exporters, and influence Asian currencies and stocks tied to global risk appetite.