East Asia Econ

Earlier this week, I published a longer note delving into the macro and market implications of the semiconductor boom. You prefer pictures to text, so this is the accompanying chart pack.

Business sentiment is middling, and the gap between large and small firms looks K-shaped. However, consumer confidence is quite strong, and the BOK has argued that sector disparities aren't an issue for monetary policy. Falling oil prices do lessen inflation risk, but also boost GDP growth.

A longer note putting the chip supercycle in the context of commodity price surges, dismissing concerns about the narrowness of growth, and exploring the different macro dynamics in Korea versus Taiwan. One is a commodity boom, the other is indeed BS, but both suggest real exchange rate appreciation

China's cycle is weak, but I'm not yet convinced it is getting worse. Japan's cycle will now be improving, but the BOJ needs to show that it can keep up. The BOK's hawkish turn can go further still if the KRW remains so weak. I think inflation risks in Taiwan are broader than judged by the CBC.

My latest video, making the case for a bottoming of China's economy. In light of this week's poor official data, the argument might look off-base, which means it should at least be interesting. I do think the logic holds up, but as discussed here, there are reasons I could be wrong.

The CBC didn't change policy today. It increased its growth forecast, but didn't sound excited about the outlook. It warned about excesses related to equities, but didn't announce any remedial policies. Inflation is expected to remain below 2%.

Core inflation has rarely been higher, the export economy is booming, and signs are emerging of stronger domestic demand. Core inflation is still only 2%, but yields are even lower (!), and there's plenty of asset price inflation in stocks. Hence the question: why wouldn't the CBC hike tomorrow?

Before the war, Japan's manufacturing cycle was gaining momentum. If the war is now over, then today's releases of machine orders, exports and business sentiment suggest that strengthening momentum can now become an important theme for Japan macro.

The sharp rise in import and export prices of recent months eased in May. But that leaves export prices at the highest level since the brief spike in 2008. That brings inflation for ROW and an income boost for Korea. With spot semiconductor prices still rising, neither trend is yet exhausted.

I have been arguing that the underlying economy has been stabilising, with prices bottoming out before the Iran war. But stabilisation is external-led, and today's data show the domestic cycle remains a mess. That will likely become a policy issue if IP doesn't stay at an annualised run-rate of 5%

BOK governor Shin Hyun Song gave a speech on Friday to mark the 76th anniversary of the bank's founding. It was short, but worth highlighting, because he sounded more confident about the outlook, and downplayed the significance of uneven growth as a factor for monetary policy.

Three themes: whether the weakness in the activity data releases of a month ago in China was noise; Japan, where one hike is unlikely to be enough to really change market conditions; and the semi super cycle, which should be having more impact on fx and rates (in Taiwan) than has yet been evident.