SYDNEY- Asian shares firmed on Monday as Chinese data surprised on the upside for once, while investors looked to navigate a minefield of central bank meetings this week that could see the end of free money in Japan and a slower glide path for US rate cuts.
Beijing reported industrial output climbed an annual 7 percent over January and February, while retail sales rose 5.5 percent on a year earlier. But real estate remained a worry as property investment fell 9 percent on the year, underlining the case for further policy support.
Central banks in the United States, Japan, UK, Switzerland, Norway, Australia, Indonesia, Taiwan, Turkey, Brazil and Mexico all meet this week and, while many are expected to hold steady, there is plenty of scope for surprises.
Tuesday could see the end of an era as the Bank of Japan is widely tipped to end eight years of negative interest rates and cease or amend its yield curve control policy.
The Nikkei newspaper on Saturday became just the latest media outlet to flag the move, after major companies granted the biggest pay hikes in 33 years.
There is a chance the BOJ might wait for its April meeting given it will be issuing updated economic forecasts then.
“Whether or not it is March or April, we suspect the language accompanying any such move will carry a cautious tone, emphasizing it more as a monetary policy adjustment rather than a tightening at this stage,” said Carl Ang, a fixed income analyst at MFS Investment Management.
“For Japan a measured and gradual path of policy normalization appears appropriate for an economy unaccustomed to higher rates and thus the policy messaging will be critical.”
Markets also assume the BOJ will hike at a snail’s pace and have a rate of 0.27 percent priced in by December, compared with the current -0.1 percent .
The central bank on Monday said it would conduct an unscheduled operation to buy bonds, presumably to head off any significant rise in yields and avoid market volatility.
