Paul Cavey

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Japan – shouldn't the BOJ be worried about consumption?

Today's BOJ's GDP downgrades were all about tariffs affecting corporates. The bank didn't sound worried about consumption. But in today's data releases, the manufacturing PMI ticked up, while consumer confidence fell sharply to a level that's only been lower three times in the survey's history.

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Korea – export and domestic underperformance

The gap in GDP growth that has opened up between Korea and Taiwan since 2020 reflects exports, but also consumption. Data today show Korean retail sales did perk up in March. But even after that, sales are still barely above the level of late 2019, while in Taiwan they've grown almost 15%.

Taiwan – still the strongest cyclical story

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Japan – retail sales weak again

Goods consumption in Japan continues to struggle, with real etail sales dropping in March back to the lowest level in two years. Services consumption has been stronger, but the renewed deterioration coincides with a rebound in inflation, which is once again squeezing real incomes.

China – not so bad....yet

Japan – tariffs matter, but so does inflation

China – corporate profitability still weak

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Taiwan – exports still offsetting consumer confidence

Korea was weak even before tariffs, contrasting with more resilience in Taiwan and Japan. In Taiwan, that's been because exports have offset weakening domestic demand, a pattern that hasn't yet changed: consumer confidence declined again in April, but the monitoring index through March held up.

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Asia – free resource for tracking East Asian economies

A new tool to view, chart and download macro data for the region

Last week, next week

Japan – broad-based inflation

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Japan – services PPI inflation still over 3%

YoY services PPI in March continued to run at above 3%, led by price rises in more labour-intensive sectors. Sequential momentum has eased a bit in recent months, but should get another boost in April, as the latest annual wage round feeds into price rises at the beginning of the new fiscal year.

Korea – business sentiment worsens again

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Japan – PMI surprisingly stable

As with the Reuters Tankan, the S&P manufacturing PMI didn't fall in April. The services PMI also rebounded, and the commentary shows no sign in the trend: "inflationary pressures strengthened, with input prices rising at the sharpest pace since February 2023 and output charges increasing solidly"

Taiwan – how to cope with the US shock

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Korea – consumers still depressed

The clearing of some of Korea's political uncertainty hasn't helped consumer confidence. It hardly rose in April, even though the survey was taken after Yoon's impeachment verdict. Inflation expectations remained near 3%. Property price expectations also ticked up, but not as quickly as in March.

Japan – four reason why the JPY hasn't helped exports

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Taiwan – labour market constrained by supply

Taiwan isn't seeing the big supply-side labour market shifts visible in Japan and Korea. The participation rate hasn't risen, and the proportion of part-time jobs remains in low single digits. As a result, ageing is constraining labour supply in a way that hasn't been apparent elsewhere.

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Korea – PPI easing with import prices

Japan shows signs of pent-up inflationary pressure, with PPI rising despite a decline in import prices. In Korea, by contrast, the usual relationship hasn't broken. If USD strength really has ended, KRW import prices will decline further, making it easier for the BOK to focus on the weak cycle.

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Korea – exports down again so far in April

Exports for the first 20 days of April were weak, falling -5.2% YoY. That isn't because of tariffs: the downcycle in Korean exports began in mid-2024. With tariffs, however, the weakness in exports can be expected to intensify. The equity market is already pricing in double-digit declines.

Last week, next week

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Region – how far will exports fall?

My leading indicator suggests a clear rolling over of the export cycle even before the real hit from tariffs begins. It might be a bit too early yet for that hit to be showing up in hard export data, but next Monday's trade statistics for Korea for the first 20 days of April will be a test.

Japan – CPI mixed, but part-time wages up

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Japan – part-time wage growth jumps in March

JBRC this week reported March part-time wage growth jumping to 5.6% YoY. Some of that looks like catch-up with the official data, but the commentary was interesting, with the rise being attributed in part to this year's shunto. The labour market continues to look very tight.

Korea – BOK says "come back in May"