East Asia Econ

The BOK didn't raise growth forecasts above potential, but still signalled some concern about the resilience of inflation. That sounds a touch stagflationary, and was used to justify a step back from its loosening stance. Growth only gets above potential in its chip-driven upside scenario.

Headline SPPI inflation was stable in October, but weak for high labour-intensive sectors, while part-time wages were strong, likely on the back of the minimum wage hike. That's an unclear picture. But right now, with the JPY so weak, the BOJ will focus more on headline CPI than these messy details.

I doubt the BOK can raise '26 growth forecasts above its estimate of potential and so shift its loosening stance. What's the wriggle room around that? 1) It says the memory cycle means risks are skewed to the upside 2) Citing financial stability risks, more members suggest rates won't change.

The FAI data point to the economy hitting a wall. But price data don't bear that out. Indeed, upstream prices show the recent stability of PPI is likely persisting. That is also true for the demand:time deposit ratio. The cycle as a whole remains both weak and messy, but there are some green shoots.

Japan is doing macro stimulus when the cycle really doesn't need it. China isn't doing any when the cycle still does. The first keeps the JPY weak. The second prevents the CNY from appreciating. Both in turn weigh on the KRW and TWD, despite substantial current account surpluses across the region.

The BOJ's base case has been that tariffs would slow inflation and growth. Today's data – November flash PMIs, and October trade and CPI data – give no indication that such slowdowns are occurring.

Global factors like US rates and JPY weakness are dragging down the KRW. But there are also local drivers, particularly Korea's big buying of overseas equities. For both the NPS and households, I would expect that to slow, with the reversal likely to be sharp if global markets really sell off.

I don't know nearly enough about tech to decide whether this is a memory supercycle. But it certainly looks like it might be, which raises the possibility that macro in Korea in 2026 could have shades of Taiwan macro in 2025.

A recap of themes for the region: China's messy cycle; nominal re-acceleration in Japan; the semi cycle as upside risk in Korea; and Taiwan's growing external excesses.

The October data are soft, but mixed: on the one hand investment terrible and property weak, on the other, output and services more stable. That probably doesn't add up to a change in policy. My idea of stabilisation does look a bit more tenuous, and would be over if upstream prices give way again.

Import prices are rising, but not by enough to think upstream inflation is about to explode. More interesting are export prices. Auto export prices aren't rebounding. By contrast, semiconductor export prices seem to be gaining upwards momentum – which is important given the rise in spot DRAM prices.

Relative to my idea that the underlying economy could be stabilising, today's monetary data for October are a little soft. In particular, both M1 growth and the M1:M2 ratio ticked down, and mortgage lending also slowed. Credit growth also dropped, but only because of less government borrowing.