FXTRADING Economic Data Summary (Asia-Pacific | 06/23)

BoJ Signals a Hawkish Stance

BoJ Deputy Governor Ryozo Himino told parliament that maintaining an overly accommodative policy for too long could push underlying inflation above the 2% target and eventually weigh on the economy. Recent comments suggest the BoJ is more concerned about the risks of tightening too slowly. Last week, the central bank raised its policy rate to 1.00% and revised up its inflation outlook, highlighting policymakers continued vigilance over price pressures.

Markets generally expect further rate hikes from the BoJ this year, with September viewed as a key window for action. Meanwhile, the Japanese government has shown support for policy normalization, and former board member Makoto Sakurai has even suggested that two additional rate hikes are possible before the end of the current fiscal year, reinforcing the increasingly hawkish tone. FXTRADING believes the BoJs focus is gradually shifting toward containing inflation risks. With interest rates already at 1.00%, inflation forecasts revised higher, and energy costs remaining elevated, the likelihood of further tightening later this year remains high.

UK Labor Market Gradually Cools

The UK labor market showed signs of moderation in May, with payrolled employment increasing by just 2,000 while annual employment declined by 119,000, leaving total employment at 30.30 million. At the same time, the number of unemployment benefit claimants rose by 31,200, up from the previous increase of 8,300, indicating softer demand for labor.

However, the unemployment rate for the three months to April eased from 5.0% to 4.9%. Average earnings excluding bonuses rose 4.4% year-on-year, while including bonuses they held steady at 3.4%. Median monthly pay growth slowed from 4.8% to 4.6% in May, although wage growth remains above the inflation rate. FXTRADING believes the UK labor market is cooling gradually but has not weakened significantly. Despite the increase of 31,200 in benefit claimants, wage growth at 4.4% is still too strong to justify a near-term shift toward monetary easing by the Bank of England.

Fed Dot Plot Maintains a Hawkish Message

The Federal Reserve left the federal funds rate unchanged at 3.50%-3.75% last week, in line with market expectations. The statement was more concise overall, but policymakers remained cautiously optimistic about the economic outlook. Officials noted that the economy continues to expand, the labor market remains stable, and business investment and productivity continue to show resilience.

More importantly than the rate decision itself, the Fed reiterated that inflation pressures have not been fully eliminated and raised its projected policy path. The dot plot showed that the median federal funds rate forecast for the end of 2026 increased from 3.4% to 3.8%, while projections for 2027 and 2028 were also revised higher, suggesting that the pace of rate cuts may be slower than previously anticipated. FXTRADING believes that although the Fed has kept rates on hold for now, its policy stance remains restrictive. The upward revision of the 2026 rate forecast to 3.8% implies that higher interest rates may remain in place for longer.

New Zealand Economy Continues to Recover

New Zealand‘s economy expanded 0.8% quarter-on-quarter in the first quarter, matching market expectations and accelerating from the previous 0.5% increase. On an annual basis, GDP grew 0.8%, while GDP per capita rose 0.5%. Nine of the country’s sixteen industries recorded growth, indicating that the overall recovery remains on track.

Manufacturing was the main driver, rising 1.9% quarter-on-quarter. Within the sector, transport equipment and machinery manufacturing increased 4.0%, while food, beverage and tobacco manufacturing rose 1.7%. Business services expanded 1.1%, and wholesale trade grew 2.4%. However, mining output fell 11.6%, while construction activity declined 1.0%, showing that some sectors remain under pressure. FXTRADING believes the New Zealand economy is continuing its recovery. First-quarter GDP growth of 0.8% and a 1.9% increase in manufacturing indicate that economic momentum is improving. Although mining and construction remain weak, the overall growth backdrop has strengthened compared with last year.