Asia Markets Poised for Gains as Investors Eye China's Industrial Profits, Tokyo Inflation Data

Asia markets are expected to open higher on Friday as investors await key economic data from China and Japan, which could shape their investment decisions in the region. The positive sentiment is buoyed by the recent rally in global markets, with the S&P 500 and Dow Jones Industrial Average reaching record highs, and the Nasdaq Composite nearing its all-time peak.

Investors will be closely watching China's industrial profits data for December, which is expected to show a fifth consecutive month of growth. According to a recent poll, major industrial firms in China are projected to have seen their combined profits increase by 16.8% year-on-year in December, marking a significant improvement from the previous months. This positive trend can be attributed to various factors, such as stable industrial production, narrowing factory price declines, and strong performance in the equipment manufacturing and power sectors.

The robust growth in China's industrial profits is likely to have a positive impact on investor sentiment in Asian markets, as it signals a strengthening of the Chinese economy and a potential increase in corporate earnings. This, in turn, could attract more investment from both domestic and foreign investors, leading to increased capital inflows into the region.

Another crucial data point that investors will be focusing on is the release of Tokyo's inflation data, particularly the core Consumer Price Index (CPI) excluding fresh food and energy. According to a recent poll, the core CPI in Tokyo might have accelerated to 2.5% year-on-year in December, up from 2.2% in November. This increase is partially attributed to rising food costs, including staples like rice, alongside the cessation of government-supported gas and electricity subsidies, which has driven energy prices upwards.

The Bank of Japan (BOJ) is likely to consider this recent inflation data when reviewing its current monetary policy. With interest rates held steady at 0.25%, an uptick in inflation may prompt the BOJ to adjust borrowing costs in response to these economic trends in the upcoming year. This potential policy change could influence investor decisions across Asian markets, as it may signal a shift in the BOJ's stance on monetary policy.

Moreover, the nationwide CPI in Japan, excluding fresh food but including energy items, showed a rise of 2.7% in November compared to a year prior. This suggests a consistent increase in inflationary pressures across the nation. The jobless rate in November held steady at 2.5%, with the jobs-to-applicants ratio remaining at 1.25, reflecting a stable labor market despite the changing economic conditions. These indicators, combined with the anticipated release of output and retail sales figures, will further illuminate the economic climate and influence investor decisions in Asian markets.

In conclusion, the release of China's industrial profits data and Tokyo's inflation data is expected to have a significant impact on investor decisions in Asian markets. The potential policy changes by the BOJ, along with other economic indicators, will shape investor sentiment and influence their decisions in the region. As investors await these key data points, Asian markets are poised to open higher, driven by the positive sentiment in global markets and the potential for further gains in the region.