Lots today. Bad PMIs in China, BOJ meeting, and all the usual month-end data releases in Japan and Korea. In Japan, the data were mixed, but in Korea, generally strong, as was Q2 GDP in Taiwan. Finally, the new data packs I've been working on.
The BOJ didn't change inflation forecasts, but even so, it continues to expect inflation at or above 2% throughout the forecast period, and says risks for prices remain skewed to the upside with "medium- to long-term inflation expectations continuing to rise". September for me is a live meeting.
But output growth and capex were strong in June. Output was lifted by both goods and services, while the tech sector gave a boost to capex. Retail sales and construction orders were weak, but overall, the data signal a bit of upside risk for the next release of Q2 GDP data in September.
The across-the-board weakening of the official PMIs will reinforce cycle pessimism, with px indicators point to an end of the recent upturn in PPI inflation. The likelihood of renewed monetary easing is growing, but detailed data – and the Politburo statement – suggest only incremental change.
I am trying out a new version of my interactive chart packs that makes navigation between economies and issues easier. It has almost 1,000 charts, and isn't yet behind a paywall. Please forward to anyone who might find it useful.
A few data releases today. In Japan, export data for the first 10 days of July, consumer confidence for the full month, and Toyota June sales. In Korea, the big release was business confidence, but also JOLTS labour market data for June, and wages for May.
In manufacturing, sentiment is rising for both exporters and domestic firms, and capex intentions are strengthening too. That suggests support for the cycle not apparent in recent equity market moves. However, non-manufacturing sentiment is weak, and the labour market still isn't recovering.
China's foreign trade volume and price data for June show import volumes continue to do sideways, while export prices outside of AI tech continue to fall. Also today, highlights from a longer note reviewing Japan's inflation trends.
A review, covering headline, underlying, goods and expectations. Underlying inflation is probably still a bit below 2%, but that matters less when headline has been at or above target for 50 of the last 53 months. Absent an external shock, a 2-a-year hiking schedule looks too light.
A few more profits charts from yesterday's release in China. The BOJ's underlying measures of inflation show core at or above target for 50 of the last 53 months. And consumer confidence in July in Korea remained elevated, though that was before today's brutal equity sell-off.
18 charts today, covering profits data in China in June, which rose sharply in electronics; services PPI inflation in Japan, which was mixed; and Taiwan's official leading indicator in June, indicating an economy that continues to boom.
The two big events this week are China's CXMT listing and the Bank of Japan meeting. The first matters because the outlook for chip demand is such a dominant regional theme. The BOJ meeting is important because of rates in Japan, but also implications for the JPY and regional currencies.
Korea Q2 GDP beat market expectations, with the highlight for me being the strength of real GDI and nominal GDP. Strong growth in Taiwan also continues, with both industrial production and retail sales rising in June, and M2 growth accelerating above 8% YoY.
Korea's real GDP growth in Q1 was solid, but nominal continues to be spectacular, rising almost 20% YoY for the first time in 30 years. Stronger nominal growth is typical of a commodity boom, and suggests more upside for rates than implied by inflation and real GDP alone.
In Japan, June export data and Q1 household incomes. Korea's Q3 loan officer survey was mixed, while PPI inflation was strong. Taiwan's labour market remains tight, with the unemployment rate anchored at 20-year lows.
Today's data for June exports and Q1 household incomes illustrate three of the big macro themes of the moment: Japan's role in the AI infrastructure supply chain, the benefits for households of buoyant asset markets, and why politicians are nonetheless talking about fiscal help for households.
In the Q3 loan officer survey, lower mortgage demand was offset by higher demand for other household loans. That points to the continuing risk of lending to finance stock purchases. The impact of the surge in equity market activity can also be seen in today's June PPI report.
Korean export growth for the first 20 days of July accelerated again to over 60%, led by semiconductors, which in turn produced a further widening of the trade surplus. In Taiwan, export orders in June also grew near 60% YoY, and rose in level terms to a new all-time high.
Detailed data for June show the huge impact that global demand for AI hardware is having on China's trade data. In Taiwan, export volumes softened in June and Q2, which is important, though the strength of TSMC's June sales and Q2 results commentary don't suggest the cycle is coming to an end yet.
China's combination of recovering output, weak expenditure, and mixed monetary isn't great, but also doesn't suggest a big change in macro policy. I think it unlikely that Japan's bid for repatriation works without more BOJ normalisation. Korea and Taiwan cycles remain strong, implying rate hikes.
A Japan outlook piece, arguing that the BOJ is likely to be more hawkish than the market expects given an improving economic outlook, and assuming no new negative shock. Also, results of Japan's senior loan officer survey, and data in China showing continued strong capital inflows in June.
It is just about possible to defend the BOJ's slow but steady hikes since 2024, in the sense that growth, inflation and the JPY have all been rangebound. But leading indicators for growth and inflation are now rising. I'd expect the bank to now move faster. The market still isn't priced for that.
In China, yesterday's monetary data and today's detailed Q2 GDP release. In Japan, the BOJ's consumer survey showing a further rise in inflation expectations. In addition, a hawkish BOK meeting, motivated by the strong semi cycle, which, with bullishness commentary from TSMC, still seems intact.
As expected, the BOK hiked rates by 25bp today. The bank expects 2026 GDP growth to be "considerably" higher than the previous forecast of 2.6%, partly because it expects the cycle to broaden into domestic demand. That will in turn support inflation. Relative to market pricing, that feels hawkish.
The continued slowdown in credit growth is led by households and CGBs – corporate borrowing has been firm. But the M1:M2 ratio is slipping again, warning that the domestic dynamic that had contributed to lessening deflation and a less dovish PBC is now once again fading.
