Investors and the Bank of Japan, meanwhile, will be paying close attention to Japanese inflation data later in the week. Economists polled by Reuters expect the annual rate of core CPI inflation to slow to 3.1% in July from 3.3% in June.
A lower print could tempt the market to price in a more gradual change to the BOJ’s ‘yield curve control’ policy, stickier inflation could have the opposite effect.
Either way, the yen will be under scrutiny – it slumped to a 15-year low against the euro lat week and is flirting with levels against the dollar that last year prompted massive yen-buying intervention from Japanese authorities.
Asian stocks have badly underperformed this year, largely due to worries over China which is battling weak growth, deflation, and capital outflows. Chinese blue chip stocks are flat this year and Hong Kong’s Hang Seng index is down 4%.
The MSCI Asia ex-Japan equity index index has now fallen two weeks in a row for the first time since April, and is up only twice in the last eight weeks.
