East Asia Econ

The fall in the UE rate in July to 2.3% isn't substantively important. The mechanics behind it were more noteworthy, in particular a ticking down in the part rate. Other data today show a softening of inflation in Tokyo in August, and nationwide retail sales falling to the lowest level in 2 years.

There's been enough data on Korea already this week, so just briefly on today's end-of-month July data. There was a nice bounce in retail sales, reflecting the impact of fiscal policy. But IP was flat, and construction ticked down, so all economy output remains range-bound.

The BOK didn't change rates today. It did note signs of cycle improvement, a sense reinforced by separate labour market data reported today. But it only raised its GDP forecast by 0.1ppt, one member voted for a cut, and the governor said the easing stance was likely to persist through 1H26.

Slightly in advance of the BOK meeting tomorrow, a review of the economy and policy. My base case is the bank ends up cutting below 2%, because cycle stabilisation is tentative, and structural downside risks loom large. In monitoring that, my key indicators are business sentiment and services CPI.

Business sentiment in today's BOK survey for August improved again. The DI also rose, suggesting the bounce is not yet completed. Some of the details were encouraging, but the sharp rise in confidence in the accommodation sector warns the overall rise is vulnerable to the ending of fiscal handouts.

Consumer confidence eked out another increase in August. But both inflation and house price expectations also rose. The BOK has been expecting higher food prices, so that isn't unexpected. However, the bank would have wanted to see more of a cooling of the property market by now.

The BOJ's inflation outlook is based on two dynamics: a waning of imported price inflation, but firmness in wages and inflation expectations. Services PPI is consistent with that framework. Headline is softening, but in sectors with high labour-intensity, it remains solid.

This is a dashboard I've been working on, where you can map China's auto exports by country and type of vehicle over time. It now includes volume and prices at a national level. I'll be adding more series over the next few weeks. I also have a favour to ask.

Governor Ueda's weekend speech on demographic decline was interesting for the nuance and stress he gave around the BOJ's usual narrative. Given Asian demographic trends, it also has relevance beyond Japan. For the cycle, they show that post the tariff scare, the BOJ remains on track to hike further.

Headline inflation eased in July, BOJ core was unchanged but still higher than 12M before, and international core was stable. High-frequency indicators and recent minimum wage dynamics suggest inflation is here to stay. I'd expect the BOJ to go in October.

20-day exports for August were a bit stronger than 10D, and recent signs of life in non-tech are persisting. PPI inflation in August was unchanged overall. Industrial goods prices look stable, though food prices are rising in August. Services PPI inflation is still much lower than services CPI.

July export orders data show a continued reshoring, but overall export orders have clearly peaked. Today's Q2 BOP data show the rise in exports has further boosted the current account surplus. With the surplus so large, the TWD is vulnerable to the sort of shifts in capital flows seen in Q2.