The highlights today were deputy governor Himino's speech in Japan, and the BOK meeting in Korea. Tech profits in China remain strong, but aren't lifting overall earnings. Consumer confidence in Taiwan weakened in July, while the official Monitoring Index continues to point to an economic boom.
Today's BOK meeting didn't throw up any big surprises: core CPI and growth forecasts were raised against the backdrop of the TOT shock, and the bank hiked again with the aim of being "pre-emptive". However, Governor Shin's remarks at the press conference produced a lot to digest.
Deputy governor Himino's argued today that all the main macro dynamics are pushing up prices, underlying inflation has been rising, and so there is now a risk of "underlying inflation exceeding 2%". Unsurprisingly, he didn't spell out the policy implications, but it does sound quite hawkish, no?
Back-to-back rate hikes aren't common, and since July, stronger KRW and lower equities have tightened FCI. However, the economic backdrop is unusually strong, so I would still expect the BOK to hike at its August meeting. That said, rather than rates, it is the KRW that looks more interesting here.
The strength in services PPI inflation in Japan is related to the Iran war and the weakness of the JPY. However, wage growth indicates more upside for PPI inflation in sectors with high labour intensity. The BOK's August survey, business sentiment in Korea continued to rise.
Lots today: trade volumes and prices for July in China; underlying inflation trends in Japan; consumer confidence for August in Korea; and industrial production and retail sales in July in Taiwan.
Upstream prices in China have picked up again during August as global energy and copper prices rebounded. An unemployment rate below 3.5% in Taiwan in July shows that the labour market remains tight, in turn explaining why wage growth continues to trend up.
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.
