Asian stock markets dipped on Monday as investors awaited key economic reports out of China and Japan later this week.

The main focus is China’s third quarter GDP figures scheduled for release on Wednesday. Analysts predict economic growth will slow to 4.4% year-over-year, down from 6.3% in the previous quarter, underscoring concerns about a weakening global economy.

Japan’s September inflation data due Friday will come ahead of the country’s central bank’s October 30–31 policy meeting. Rising prices are putting pressure on the Bank of Japan to move away from its ultra-easy monetary policy despite risks of recession.

South Korea’s central bank will also announce its interest rate decision on Thursday. The Bank of Korea has kept its key rate steady at 3.5% for five straight meetings since February, trying to balance inflation against growth.

In regional market action, Australia’s S&P/ASX 200 index slipped 0.24% at the open. Japan’s Nikkei 225 dropped 1.67% while the Topix index lost 1.32%. South Korea’s Kospi benchmark fell 0.58%.

Hong Kong’s Hang Seng index was roughly flat, down 0.05%. China’s CSI 300 index dipped 0.19%.

On Friday, U.S. stocks ended mixed amid volatility driven by a surge in oil prices and rising inflation expectations. The S&P 500 lost 0.50% while the tech-heavy Nasdaq shed 1.23%. But the Dow eked out a 0.12% gain to end the turbulent week.

Investors Cautious Ahead of China GDP Figures

The health of China’s economy is front and center this week. Sagging global demand, disruptions from ongoing COVID-19 lockdowns, and a real estate crisis have put pressure on growth in the world’s second largest economy.

Economists expect China’s GDP to slow from 3.9% in the second quarter to 3.5% in Q3, down from a full-year target of around 5.5%. Retail sales likely stalled while industrial output slowed.

Further weakness in China would dampen recovery prospects across Asia. Investors are hoping for signs of resilience and policy support from Beijing to stabilize conditions. But strict COVID curbs and regulatory crackdowns continue to weigh on consumer and business sentiment.

All eyes are also on the Communist Party Congress which opened Sunday. The leadership reshuffle is expected to grant Xi Jinping a precedent breaking third term as party leader. Investors are waiting to gauge Xi’s future economic and reform agenda amid growing state intervention.

Japan Inflation Viewed as Key to BOJ Policy Shift

In Japan, nationwide core CPI for September due Friday is forecast to show inflation quickening to 3% from 2.8% in August, exceeding the Bank of Japan’s 2% target for six consecutive months.

While inflation remains modest compared to Western levels, price pressures are building in Japan’s energy-import dependent economy. A weakening yen has added to imported costs while wage growth is picking up.

Markets speculate the BOJ may tweak its yield curve control policy at next week’s meeting. But Governor Haruhiko Kuroda has stressed the bank will not hike rates or tighten monetary policy despite currency depreciation.

The dilemma for the BOJ is that inflation is rising just as Japan’s economy is losing steam. GDP shrank an annualized 3.8% in Q2 as rising prices hit consumer spending. Rate hikes to tame inflation could further undermine growth. The bank has signaled steady policy to support the economy.

South Korea GDP Shrinks on Weak Exports, Consumption

South Korea has also seen growth decline on slowing exports amid global uncertainties. Preliminary Q3 GDP figures last week showed the economy shrinking 0.3% quarter-on-quarter, entering a technical recession after contracting 0.7% in Q2.

Private consumption stalled last quarter on inflation pressures while facilities investment contracted. Export growth slowed to 2.8% from 19% in Q2 as overseas demand weakened.

The Bank of Korea has lifted rates aggressively to curb inflation forecast to average 5.7% this year before slowing to 2.7% in 2023. But the BOK is expected to pause rate hikes for now to monitor growth risks. Governor Rhee Chang-yong has stated the bank will support economic recovery.

Asia-Pacific markets face headwinds from elevated inflation, tightening monetary policies, and risks of recession in major developed economies. Investors are hoping for greater policy support and stimulus measures to bolster slowing growth.

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