The BOK discussion tomorrow should have two levels, the usual analysis of growth, CPI, housing, and the KRW, but also analysis of how the huge semi terms of trade shock affects medium-term economic prospects. The first justifies rate hikes. I think the second argues for more hawkishness still.

Q2 GDP data were weak, but the damage was done at the start of the quarter, with a clear improvement in industrial momentum thereafter. With the deflator also positive for the first time since 2022, that's likely enough for policymakers, even though domestic demand remains a mess.

China's exports continue to be strong. The rise in prices of semiconductors is playing a role, but so is the sharp increase in auto volumes, which is now over 1mn vehicles a month. Protectionism in the rest of the world has yet to disrupt these trends, which thus continue to support China's GDP.

Cycles show signs of broadening, towards capex and services in Taiwan and Korea, and exports and consumption in Japan. This provides an opportunity for CBs, especially the BOJ, to become more hawkish. The question for markets is whether this can finally stop currencies from weakening.

My latest video, discussing why inflation risks won't end even if the Iran War eventually does. The reasons: both cost-push and demand-pull from the semiconductor boom, dynamics that are being reinforced by the cheapness of currencies.

Average CPI and PPI inflation remained relatively elevated in June. However, most of the rise has been because of external factors, and leading indicators show that for now, the peak has likely been seen.

The flow story behind KRW weakness has transitioned from overseas buying by domestic retail to domestic selling by foreigners. Two other factors help inform the exchange rate: correlation with the JPY and, perhaps, a BOK that is late in hiking given the huge acceleration in NGDP growth.

June's core inflation of 2.3% isn't high in an absolute sense. But outside LNY, it is the highest since the 1990s, and, remarkably, above both the policy rate and 10-year yields. Energy inflation will ease, but with wage growth of 2.7% and rising, and equity prices strong, rates really look too low.

Today's May consumption activity data were stronger again. That rise can be explained by three factors: a temporary boost as purchases of household appliances are brought forward, decent – though in May, not necessarily stronger – wage growth, and perhaps, a wealth effect as asset prices rise.

China's cycle looks more mixed rather than bad. In Japan, there are clear signs of an acceleration in both activity and inflation. For Korea and Taiwan, the theme is a broadening of activity as the semiconductor export boom feeds into domestic economies.

A slide pack laying out themes for the region overall, and for each individual economy.

The detailed release of the Tankan confirms the message of yesterday's summary: price pressures are rising again, and momentum in the corporate sector is strong. There is some sluggishness in autos, but as in export data, that is being offset by AI demand for electronics.