Region – monthly cycle slides
Reasons for upside risks in Japan, with implications for BOJ; conviction that China isn't following Japan's 1990s past, meaning rates should be low enough; unlike the BOK, the CBC in Taiwan won't cut rates, and might yet hike again.
Here is this month's cycle slidepack:
Japan
- Core inflation solid around 2%
- But domestic prices still well below global prices in JPY terms
- That means upside inflation risks. BOJ to hike more quickly
China
- Cycle still soft, and global tariffs would be a problem
- But China isn’t EM – depreciation doesn’t force domestic tightening
- And it isn’t 1990s Japan. Structural strengths, and rates low enough already
Korea and Taiwan
- Korea has the weakest cycle. Taiwan the strongest
- BOK to cut more. CBC won’t cut, still might hike
- Both will find it very tricky to handle Trump