Tomorrow's comprehensive release will add more details, but today's summary Tankan looks solid, for overall sentiment, the labour market, and inflation. For BOJ doves looking for reasons not to hike further, the Tankan doesn't supply them.
Today's September PMIs in China were mixed (construction PMI weak, S&P services firm), and Japan's August retail sales fell. There should have been more data, but Korea's stats website is still down following a fire, and after a holiday, Taiwan's consumer confidence survey has yet to appear.
This discrepancy in the PMIs – S&P versions better, official PMIs still weak – is puzzling. Probably, the overall message is that China is back to a period of muddling through, with the cycle not robust, but getting some support from the better equity market and rise in the credit impulse.
A quiet day for domestic macro today. The only data release was Saturday's profits data in China. In Japan, MPC member Asahi Noguchi gave a speech, in which he made a couple of interesting points, but governor Ueda's speech at the end of the week will obviously matter more.
Japan inflation indicators are mixed, so this week's Tankan survey and Ueda speech will be important. Korea's cycle is still weak, but this week's CPI data matter less when house prices have re-accelerated. Elsewhere, China's PMI will show whether nominal growth is softening again.
The main releases today were business confidence in Korea (weak) and September inflation for Tokyo (noisy). Also today, services exports for August for China, which offer further evidence that the boost to GDP from net exports is fading, and leading indicators for Taiwan which remain solid.
Inflation measures have become more mixed in recent weeks. But the drop in core measures of CPI inflation in the capital in September don't add to downside risks, being more the function of government subsidies. In other news, exports were firm in the first ten days of September.
The renewed drop in business sentiment in today's survey is probably overdone, but confidence does remain weak, particularly in domestic industries. Price intentions also softened, so the macro case for easier policy remain strong, though for now, the BOK also has to worry about housing prices.
Some more information on inflation in Japan, with services PPI inflation for August, weekly rice prices into September, and the minutes of the July BOJ meeting. And from yesterday, August IP and retail sales data in Taiwan.
Minutes of the July MPC meeting show a long but rather inconclusive discussion of the concept of "underlying" inflation. Recent data don't bring clarity: services PPI inflation has slowed, but not in labour-intensive industries, while the rice price has rebounded further.
A few data updates today: upstream prices in China through the second 10 days of September were stable, but not rising; the flash manufacturing PMI for Japan for September weakened; and consumer confidence in Korea remains high, but property price expectations are also firm.
Despite softening in September, consumer confidence remains high. I doubt that it will be sustained, however, if business confidence remains so weak. Consumer property price expectations also remain firm, which matters for policy when household debt has again become such a big issue for the BOK.
Data show PPI ticking up in Korea, but not by enough to think inflation is about to accelerate; if anything, services PPI continues to suggest downside risks for underlying CPI. Elsewhere, Taiwan August export orders were firm, suggesting the 1H surge in actual exports wasn't just front-loading.
Wage growth, household savings and income levels are huge issues across the region. This slidepack shows how these are linked with exchange rates to lay out the outlook for currencies in China, Japan, Korea and Taiwan.
More details on the emerging second wave of Chinese auto exports; detailed volume data for Japan's exports in August, showing some change, but no real dislocation; a big slowdown in exports for the first 20 days of September in Korea; and a slight rise in unemployment in Taiwan in August.
Last week's BOJ meeting reinforced my expectation for an October hike, as did the firmness of August CPI. The next inflation update will be the SPPI release on Thursday. However, the focus the next few days will be Korea, with the September consumer and business confidence surveys.
My latest video, discussing the important question posed in a report of a few weeks ago. Japan's population peaked in 2010, and aggregate consumption stopped growing shortly after. With the number of people continuing to shrink, can consumption – and thus the broader economy – ever grow again?
The main developments in Japan today were in Japan, with the BOJ meeting and CPI data for August. Elsewhere, China's fx settlement data suggest renewed capital inflows. Growth in consumer lending in Taiwan ticked up in August, but remains much lower than the peak of a year ago.
While the BOJ remained on hold today, the two dissenting votes to hike are important signals in the direction of travel. The context is inflation that remains firm, with today's August national CPI data showing some signs of underlying inflation starting to creep higher again.
This is a bit later today, as I was going through the conclusions of Taiwan's CBC meeting. So that's included below, plus more details of China's August exports (providing further evidence of the re-acceleration in auto sales), as well as Japan's July machine orders.
Macro volatility – in inflation, growth, property prices and the TWD – eased in Q3, and it was no surprise that the CBC was on hold today. That won't change if AI demand growth slows. But the AI cycle has proven tough to forecast, and I'd expect the CBC will also be faced with more TWD strength.
China's trade data are published over the course of four releases each month. We are now onto the second, with three main takeaways: auto exports are accelerating again, import demand is up, and the trade surplus continues to broaden.
I am catching up with things after my break. Surveys of the last few days and today's trade data for August show tariffs aren't yet triggering a big macro dislocation in Japan. That's important for the BOJ. In China, the macro data for August show the bottoming of the activity remains fragile.
Manufacturing sentiment in the EW (Aug) and Reuters Tankan (Sep) surveys is back above the long-term average. Export volumes have softened the last couple of months, but are still above end-2024 levels. This is probably a lesser impact from tariffs than the BOJ had expected.
The major themes: the ending of the first stage of China's post-2020 forced structural adjustment; in Japan, peaking of inflation but BOJ still to hike; BOK cuts but inflation higher than I would have expected; expecting renewed TWD strength. I am now away for a few days, back on September 16th.
