Japan CPI data showed headline near 3% and rising (inflation!), but core near 1% and falling (deflation!). Price data in China, by contrast, are stable, which is at odds with weak FAI. Finally, my updated trade mapper dashboard, which now covers autos and the battery and rare earth supply chains.
National inflation data for September was messy again. One reason was public service prices falling, a development that stands out when a theme of recent BOJ speeches has been pent-up inflation pressure in the public sector. Overall, the inflation picture still looks solid.
China's detailed monetary data for September are important, showing three positive trends. Elsewhere, the BOK didn't change policy, with just hints of becoming more positive. In Taiwan, IP and retail sales data for September continue to show the desynchronisation of the export and domestic cycles.
Detailed monetary data for China continue to look more positive. Three trends stand out: a further slowing of the flow of household money into time deposits; a resumption of capital inflows; and continuation of the faster pace of PBC lending to the financial sector.
There were slight hints of a shift from the BOK today, but the governor also stressed the need for more certainty in areas like the Korea-US trade talks, and overall, the bank's basic stance was unchanged. For a clearer shift, I think business sentiment and monthly economic output need to rise.
Lots of data to analyse today: exports in Japan, PPI in Korea, and export orders (released yesterday for Taiwan). Also, a longer piece taking stock of the Korean cycle and thinking about the BOK before tomorrow's monetary policy meeting.
The BOK tomorrow will likely remain on hold tomorrow, primarily because of the recent sharp rise in house prices. I think the more important question is whether the bank changes its view about rate cuts into 2026. I don't think it will, but here I outline a scenario that would get that outcome.
Detailed Q3 GDP data for China don't provide much extra clarity. By contrast, yesterday's speech by Takata of the BOJ was a clear argument of why he thinks the bank needs to hike. In Korea, data for the first 20D of October show strong growth in exports of semiconductors, but not in anything else.
BOJ board member Takata Hajime yesterday likened the downwards revisions to the BOJ's forecasts on the back of tariffs to a typhoon-linked "planned suspension" of public transport that now needs to be lifted. He also argued inflationary pressure is increasingly being driven by domestic factors.
Detailed Q3 data include a few puzzles: net export contribution stable when the trade surplus declined; construction dropping sharply when property has looked less bad; and quarterly investment growing when monthly FAI has dropped. The one detail that really adds up: manufacturing remaining strong.
Little sign of change in today's China macro data. So, while areas like consumption aren't as weak as the headlines suggest, in activity data overall there's little sign of stabilisation, let alone recovery. I discussed some of the issues around China, as well as the region, in a podcast last week.
I really enjoyed doing this podcast with Bilal Hafeez from Micro Hive. It was a great chance to get into a lot of the structural themes across the region that I have been working on.
Property is weak, manufacturing FAI has slowed, consumer spending on goods is soft, and price deflation isn't lifting. However, services consumption is better, and output of both goods and services is growing by more than 5%. The government likely still thinks the economy is muddling through.
My China theme – signs of stabilisation in the underlying cycle – seems anti-consensus, and, frankly, likely won't be supported by today's data. Elsewhere, the key issues this week will be what hints Takaichi's new government gives about the BOJ, and what confidence the BOK has for the 2026 outlook.
Korea's labour market looks better, though sustainable recovery likely needs stronger business confidence. Other data suggest an end to the sharp price falls for Korean auto exports to the US. Cars are unusual: in neither Korea nor the other economies have overall export prices been as volatile.
Employment bounced in September, providing more evidence of cycle bottoming. That shouldn't matter much for BOK thinking: in July it raised employment forecasts, and has expected recovery into 2026. I am sceptical that recovery runs far, but there are upside risks if business sentiment improves.
Three things important for markets: yesterday's monetary data from China, today's speech by BOJ Board member Naoki Tamura, and TSMC's Q3 earnings report. In addition, Japan released service-sector data and machine orders for August.
Yesterday's monetary and credit data for September weren't bullish, but I do think they were incrementally encouraging: excluding CGBs, credit issuance and the credit impulse ticked up; the firming of M1 growth has continued; and there is more evidence of a floor in the M1:M2 ratio.
Naoki Tamura's speeches are always clear and interesting. Some of his remarks today overlap with points I've highlighted the last few months: the strength of the Tankan survey and sakura report; repressed inflation in public services prices; the negative impact of inflation on pensioners.
A couple of notes on China today, one covering today's inflation release, and the other a slide pack making the case for higher rates. Elsewhere, Taiwan released FDI data for September. Outflows have eased in recent months, but the clear shift away from investing in China is persisting.
For the first time since 2021, my models show a fall in the probability of easing. The backdrop is effective monetary policy: inflation is low, but there aren't signs of rising real rates. For now, my base case is rates stop falling. For rates to rise, inflation needs to show up outside of equities.
The stabilisation of PPI is fragile, with continued sharp falls in some of the sectors targeted by anti-involution, as well as continued weakness in building materials prices. In CPI, falling food prices will eventually reverse, but soft services prices shows underlying CPI inflation remains weak.
An update on pensions in Japan, which are being cut in real terms. Also, wage growth in Taiwan, which is accelerating. The pick-up is mild, but is still important, showing that the near-deflation experience of 2000-2020 isn't being repeated.
China full-month exports for September (still strong), and Korean exports for the first 10 days of October (including only 3.5 working days, so too few to reach strong conclusions). Also, the new monthly summary of PBC liquidity operations, showing steady balance sheet expansion.
Shipments to the US remain as low as in May. But with exports to other regions continuing to rise, the uptrend in overall shipments that began in mid-2023 remains intact. At the same time, imports in the last few months have risen a bit, so the trade surplus, finally, has eased back.