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The fall in credit in April, while unprecedented, can be argued away as reflecting a temporary shortfall in official bond issuance. It is more difficult to dismiss the equally unprecedented drop in M1 in the same way.
CPI deflation is stabilising, though because of food prices rather than domestic demand. The surprise in April was the lack of any lessening of PPI deflation, despite some improvement in leading indicators.
The big change in household behaviour isn't from spending into saving – in both respects, pre-covid trends have been regained. Rather, the shift is savings into bank deposits and out of financial and property investments. That matters for inflation, and for policy.
It feels to us that, with so much of the market's focus being on $JPY and the MOF, not enough attention has been paid to the increasing confidence being expressed by the BOJ.
Part-time wage growth is now finally reflecting the labour market tightness seen in survey data, and so supports the BOJ's confidence in the macro cycle.
Our monthly chart pack. Three themes stand out: the confidence of the BOJ; the significance of policy that tackles property inventories in China; and Taiwan remaining as the big post-covid winner.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
It has taken a long time, and still isn't powerful, but recovery is finally being seen in the manufacturing PMIs. At the same time, non-manufacturing isn't slowing down much, and price pressures are picking up again. Taiwan doesn't look like an economy where policy is too tight.
The PBC's Q1 depositor surveys show that it is less consumption sentiment per se that is weak than consumer price and property expectations. In this context, the news that the Politburo is studying ways to reduce property inventories is potentially significant for the macrocycle this year.
Core inflation looks controlled, but headline continues to run around 3%. Leading indicators don't suggest that goods prices pressures are about to subside quickly. One reason is the weakness of the KRW and as a result, our model still isn't flashing the risk of a near term change in policy.
The boxes in the BOJ's full outlook report present a clear explanation of the bank's confidence around wages and prices, and hint at the policy implications.
The mfg PMIs continue to suggest the industrial cycle, in terms of activity and pricing, is through the worst. For now, though, the strength is mainly in exports. As a growth driver, that shouldn't be dismissed, but the upturn would feel more sustainable if domestic indicators were improving more.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
The BOJ didn't change policy, but once again, sounded incrementally more confident, issuing a FY26 core inflation forecast of +2.1%. That outlook makes policy rates still near zero look very low.
Q1 GDP was solid, but the weakness in business sentiment in April makes us feel economic momentum is incrementally weaker. The consumer survey showed price expectations remaining elevated, which fits with weekly price data showing no big slowdown in food or energy price inflation through April.
While not yet certain, it looks like the recent fall in services PPI might be bottoming. That is important for a BOJ that will want to sound more hawkish given rising $JPY.
Export volumes haven't responded to JPY weakness, but profits have. That's feeding into manufacturing sentiment, which is better than history, and better than the rest of the world. With services sentiment also strong, the BOJ can continue to argue the macro cycle is warming up.
Cyclically, China's exports are improving, but the lift doesn't look particularly strong yet. Structurally, too, recent export performance has been a little underwhelming.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
We estimate that sequential core CPI inflation turned negative in March. The macro backdrop suggests that should be temporary, but uncertainty about the real strength of the domestic inflation dynamic constrains the BOJ's ability to respond to the unhelpful weakness in the JPY.
The belated release of the PBC's consumer survey continues to show falling price expectations, and so hint at rising real rates.
The consensus on China has improved in recent weeks, but there's nothing in the Q1 activity release to reinforce that shift.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
China's monthly monetary release doesn't seem nearly as important as it once did, because a lot of the major indicators are rangebound. The one indicator that looked a bit different last month was M1, but that rebound fully reversed in March back down to just 1.1% YoY.
We think today's export data were strong, reaching an all-time high in CNY terms. If there was weakness, it was in imports. The result, obviously, is a renewed widening of the trade surplus.