FXTRADING Economic Data Summary (Asia-Pacific | 04/29)

Bank of Japan Keeps Policy Rate at 0.75%

The Bank of Japan has kept its short-term policy rate unchanged at 0.75%, largely in line with market expectations. The 6–3 vote split within the policy board shows that the camp favoring tightening is no longer a marginal voice. Board members Hajime Takata, Naoki Tamura, and Junko Nakagawa clearly supported a rate hike to 1.0%. Their reasoning is straightforward: the current price environment is already close to the target range, and maintaining an accommodative stance could instead introduce new risks.

More importantly, the BoJ raised its core CPI forecast for fiscal 2026 sharply from 1.9% to 2.8%. The drivers behind such a significant revision are relatively clear—rising energy prices combined with global supply chain pressures, particularly amid ongoing Middle East tensions, are pushing imported inflation higher. FXTRADING believes that although the BoJ is holding steady for now, internal dynamics have already shifted. The upward revision in inflation expectations, along with the divided vote, suggests that a rate hike is only a matter of time, with policy gradually tilting toward tightening.

U.S. Housing Market Enters Cooling Phase

Recent data from the U.S. housing market shows that over the 12 months through February, the S&P Case-Shiller National Home Price Index rose just 0.7% year-over-year, further slowing from 0.8% in January. While prices are still rising on the surface, the pace has clearly moderated, reflecting the growing impact of high interest rates on housing demand. Elevated borrowing costs are prompting many potential buyers to stay on the sidelines, leading to a noticeable decline in transaction activity.

Structurally, more than half of major cities have seen year-over-year price declines, indicating that the adjustment is broadening. Even in relatively strong markets, gains remain modest—Chicago rose 5.04%, New York 4.74%, and Cleveland 4.15%, while Denver has already turned negative with a 2.18% decline. At the same time, inflation has outpaced home price growth for nine consecutive months, further compressing real asset returns. FXTRADING believes the U.S. housing market is retreating from elevated levels, with high rates and inflation jointly weighing on demand. The cooling trend is likely to persist, and the sectors support for the broader economy is expected to weaken.

Rising Cost Pressures on European Firms

The ECBs SAFE survey shows that firms have significantly revised up their price expectations for the year ahead. Expected selling prices increased from 2.9% to 3.5%, while input cost growth rose even more sharply from 3.6% to 5.8%. The core driver remains higher energy prices, with ongoing uncertainty in the Middle East pushing costs higher and forcing firms to pass them on through pricing.

Notably, data collected after late February shows a clear jump, indicating that expectations shifted quickly following the escalation in conflict. In contrast, wage dynamics have not strengthened alongside costs. Wage growth expectations actually declined from 3.1% to 2.8%. This suggests that the current inflation cycle is not driven by overheating demand but rather by external shocks, primarily through cost transmission. FXTRADING believes that inflationary pressures in the euro area are rebuilding, with a structure dominated by imported cost shocks. This will constrain the scope for monetary easing, making it difficult for the ECB to pivot quickly toward a looser stance.

German Economic Strain Deepens Further

Germanys Ifo Business Climate Index fell from 86.3 to 84.4 in April, marking its lowest level since May 2020. Both the current conditions index and the expectations index declined, to 85.4 and 83.3 respectively, indicating that businesses are pessimistic about both the present environment and the outlook ahead.

Rising energy costs linked to Middle East tensions are once again putting pressure on the cost side, while demand is also weakening. The service sector appears most affected, while manufacturing and trade show some relative stabilization but remain in weak territory overall. As a highly energy import-dependent economy, Germany is particularly exposed to external shocks, amplifying the impact. The rapid deterioration in confidence reflects this sensitivity. FXTRADING believes Germanys vulnerability to external shocks is becoming increasingly evident, and the combination of weakening confidence and rising costs suggests that economic growth will remain under pressure in the near term.

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