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.

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.

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.

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.

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.

The BOK discussion tomorrow should have two levels, the usual analysis of growth, CPI, housing, and the KRW, but also analysis of how the huge semi terms of trade shock affects medium-term economic prospects. The first justifies rate hikes. I think the second argues for more hawkishness still.

Q2 GDP data were weak, but the damage was done at the start of the quarter, with a clear improvement in industrial momentum thereafter. With the deflator also positive for the first time since 2022, that's likely enough for policymakers, even though domestic demand remains a mess.

China's exports continue to be strong. The rise in prices of semiconductors is playing a role, but so is the sharp increase in auto volumes, which is now over 1mn vehicles a month. Protectionism in the rest of the world has yet to disrupt these trends, which thus continue to support China's GDP.

Cycles show signs of broadening, towards capex and services in Taiwan and Korea, and exports and consumption in Japan. This provides an opportunity for CBs, especially the BOJ, to become more hawkish. The question for markets is whether this can finally stop currencies from weakening.

My latest video, discussing why inflation risks won't end even if the Iran War eventually does. The reasons: both cost-push and demand-pull from the semiconductor boom, dynamics that are being reinforced by the cheapness of currencies.