Japan July CPI and August flash PMI point to rising inflation and a stronger cycle; Korea July PPI inflation softened, but exports in the first 20 days of August rose; Taiwan export orders in July also increased, with incremental drivers being servers and cooling products for AI devices.
Summary of a recent outlook note on China; trade data in Japan that continues to be boosted by AI tech demand; a collapse in Korea's net foreign assets because of the rise in the Kospi that boosted the value of foreigners' domestic equity holdings; and another quarter of 20%+ CA surplus in Taiwan.
I am still totally convinced that cycle dynamics today are that different from 6M ago. But that property still hasn't found a floor is a concern, and it would now be less of a surprise if monetary easing starts again. For me, the interesting question is whether that has implications for the CNY.
A lot is going on in markets, but for data, it has been a quieter day. Core machine orders in June in Japan were flat-ish, but overseas and tech exports remained strong. Household debt in Korea is rising in KRW terms, but is now falling sharply relative to GDP.
Relative GDP performance across the region, and a few more updates on China: detailed auto export data and fx settlement data for July, and upstream prices through the first 10 days of August.
Another round of weak domestic demand data for China. Japan Q2 GDP growth softened, but I thought the details looked ok. Taiwan's FDI into the US is once again increasing sharply.
Retail sales have been anchored around zero for more than a year, property activity is still dropping and FAI is contracting. Nonetheless, IP is growing around 5%, partly because of exports, and the government's attitude suggests that it continues to think that is enough.
China macro isn't weak enough to trigger a change in policy direction. The JPY is weak enough to speed up BOJ tightening and puts pressure on Takaichi to change fiscal rhetoric. KRW is starting to look more interesting than rates, while in Taiwan, domestic demand puts the focus on rates.
China's July money data were soft, but not much worse. Terms of trade data for Korea show strong GNI/nominal GDP growth continues. Headline growth in Taiwan is slowing from crazy rates, but domestic demand is stronger. Also, my guide to China's consumer data.
Headline growth rates are slowing, but the government's qualitative assessment remains bullish, there are more signs of life in domestic demand and services, and while a 2026 inflation forecast of a bit over 2% isn't so high, it has been raised four quarters in a row, and is above the policy rate.
The big macro dynamic is the sharp rise in chip prices that is boosting the terms of trade, and thereby lifting nominal GDP and national income. Today's July export and import price data show that these trends remain in place. Rates have priced at least the first stage of this. The KRW still hasn't.
China's economic data are widely cited – but aren't well understood. To try to tackle that, I have been making some data guides. This first one tackles consumption.
The main data release today was PPI, import and export prices in Japan, which show inflationary pressures easing from June, but remaining high. As would be expected given the big rise in nominal GDP, tax revenue in Korea is growing strongly.
The Japan Reuters Tankan shows the recovery in manufacturing sentiment that was interrupted by the Iran War is back on track. In Korea, unemployment remains below 3%, and that will be a truer measure of labour market tightness if some of the structural supply side shifts continue to lose momentum.
Today, some charts on a longer examining fiscal policy in Japan. In today's data releases, exports in the first ten days of August ticked down. Likewise, growth in tax revenue in Taiwan slowed.
A longer note on fiscal policy: the rhetoric of loosening versus reality of tightening of Abenomics and the early part of Takaichi's administration, the costs of that for the household sector versus the benefits for corporates, and what all that means for Takaichi's stance going forward.
Summaries of three notes, covering: 1) yesterday's weak July inflation print in China; 2) today's summary of opinions of the July BOJ meeting and a few data releases in Japan; and 3) Taiwan's June wage data showing the slow but steady acceleration in wage growth is continuing.
Annualised regular wage growth in both manufacturing and services has been above 3% since 2024. In Q2 in manufacturing, it has been near 4%. The risk remains that the export cycle now slows, but TSMC's strong sales and elevated manufacturing overtime don't suggest that is happening yet.
Today's summary of opinions of the July meeting had two themes: first, AI-related demand, and second upside risks to inflation – and the need for monetary policy to control them. The data flow showed a modest slowdown in bank lending, a somewhat sluggish EW survey, and a fall in the CA surplus.
China macro is again a contrast between export strength and renewed deflationary pressure. Takaichi's sales tax cut doesn't look like the policy approach Bessent wants. For Korea, data an BOK analysis points to upside risks. In Taiwan, the key issue is lagged spillover from the 24-25 export boom.
Inflationary pressure turned down again in July. That wasn't a surprise, given the decline in global energy prices. The sharp MoM drop in CPI was, however, still notable, being comparable only to the global financial crisis and the initial covid outbreak.
The longer note today looks at a BOK report on spillovers from the chip boom. Exports in both China and Taiwan were softer in July, but probably because of noise. Japan released consumption data for June, exports for the first 20 days of July, and BOJ transaction data for the full month.
The BOK this week published a nice report on spillovers from the terms of trade boom. It wouldn't be fair to say that this pays only lip service to the usual concerns on why spillovers might be limited. But the report's central expectation is that the impact will be "both sizable and persistent"
Korea's current account surplus, already enormous in May, rose further in June. That, and the easing of foreigner equity selling, has allowed (at last) some strengthening of the KRW. Taiwan headline inflation ticked down in July, but underlying price pressures remain firm.
Both headline and core CPI inflation ticked down in July as energy prices eased. However, underlying inflation feels firm, with sequential core failing to break below 2%; import price, PPI inflation and CPI computer price inflation rising to decade highs; and services inflation running at 2.6%.
