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This week in Asia: All eyes on Japan

Investors' focus will turn to Asia again this week, particularly Japan, after a well-telegraphed interest rate hike by the U.S. Federal Reserve lifted uncertainty over monetary policy in the world's largest economy.

Now that the Fed has lifted rates, investors are starting to assess the impact on Asia. For countries in the region that have relied on debt-fueled growth in recent years, higher borrowing costs could fan concerns over a credit crunch.

Exporting countries in the region are also especially worried about the impact of the slowdown in China.

Japan's data deluge on Christmas day

Last week, the Bank of Japan announced plans to increase purchases of exchange-traded funds(ETFs) to 300 billion yen ($2.45 billion) in firms that invest in physical and human capital in a surprising move to encourage investment.

The central bank also increased the average maturity period of its government bonds (JGB) purchases to 7-12 years next year.

Japan's government will be releasing a monthly economic report on Monday, expressing its views on the economic outlook after dodging recession in the third quarter.

Christmas on Friday will be a carefully watched day for Japanese investors, with Japan's monthly slew of data to be released.

Japan will release its November Consumer Price Index Friday, but weak global commodity prices are expected to weigh on the headline inflation index, which is expected by analysts to fall year on year for the fifth consecutive month.

A Reuters poll expects core consumer inflation will be flat from a year earlier, and that lower oil prices will weigh on the Bank of Japan's ability to meet its 2 percent inflation target.

The unemployment rate is forecast to tick up slightly on Friday, after last month's surprising decline to 3.1 percent. However Moody's Analytics cautions that "the good headline figure masks underlying issues in Japan's labor market, including tepid wage growth and a declining working-age population."

Japan's Household Expenditures Survey, while falling year on year, is also expected to be an improvement from the previous month's decline. Recent plans of government spending and further BOJ easing will give consumer sentiment a boost, and support household expenditures.

Lastly, Japanese housing is also expected to show an improvement from last month's 2.5 percent decline. However, investment housing demand is expected to wane without further monetary easing or substantial wage growth.

Trading will be shut on Wednesday, as the nation celebrates the Japanese Emperor's 82nd birthday.

No cheer for South Korea consumers

This Thursday, South Korea's December consumer confidence is likely to remain at similar levels to November, on weaker sentiment about the domestic economy, despite accommodative monetary policy.

Last Wednesday the Bank of Korea set new three-year inflation targets at 2 percent, a move away from its policy of using a basket of consumer prices.

The current inflation target band is 2.5 to 3.5 percent, but actual headline inflation has stayed below the lower end of the band since the implementation of the target band.

Elsewhere in Asia

After the Fed raised rates last week, Hong Kong's central bank followed suit and raised the base rate it charges through its overnight discount window by 25 basis points to 0.75 percent on Thursday. The move is expected to apply further pressure on Hong Kong's real estate market.

Hong Kong November Consumer Price Index is due on Monday.

Across the straits, Taiwan has domestic trade and industrial production data due on Wednesday. Both indicators are closely related.

Domestic trade is likely to improve slightly from last month, but still decline from the same period last year. The index is highly correlated with industrial production, which has come under pressure as Taiwan's exporters feel the heat from slowing Chinese demand.

Industrial production is forecast to decline 5.5 percent year on year, said Moody's Analytics.

Last week, Taiwan's central bank unexpectedly cut interest rates for the second time this year, and noted that the global economic recovery was worse than expected.

November Consumer Price Index in Singapore and Malaysia will be released on Wednesday.

Malaysia's headline inflation is expected to be 2.1 percent year on year in November, due to a high base effect from a fuel price hike in October last year.

Singapore's headline CPI will remain negative in November, with transport and accommodation costs the biggest drags, said Bank of America Merrill Lynch in a note.

Singapore's November industrial production likely contracted in November, continuing the weak performance throughout the year. The soft PC market has been a drag on Singapore's electronics production, while the oil price slump has decreased demand for oil rigs and marine equipment, said Moody's Analytics.

-- Reuters contributed to this report

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