Lots of data releases across the region today. Two themes stand out: 1) Rising CA external surpluses and inflows, with the latest indicators coming from China and 2) improving terms of trade, seen in Korea's export/import price data for December, and Taiwan's Q4 GDP release.
January fx settlement data suggest large fx intervention for a second consecutive month. One reason is the CA surplus, which other data today show widened in Q4. Another is interest rates which are more stable, even though monetary trends aren't changing much, and property prices continue to fall.
Today's main release was PPI in Japan, with the most interesting takeaway being higher export prices. In Korea, weekly prices show food and energy inflation softening so far in February. Data in China show interest rates for mortgages stabilising, but continuing to decline for firms.
Import prices aren't rising quickly, but they do remain elevated, supporting PPI in a way that wasn't true during Japan's long deflation. More interesting now is the strength of export prices, a dynamic that boosts exporter profits, and via the terms of trade, provides a tailwind for domestic income
China's CPI inflation dipped in January, but that was holiday-related. PPI,by contrast, rose MoM for the second consecutive month. Labour market data in Korea isn't getting worse, but is sluggish. By contrast, Taiwan wage growth in 2025 reached the highest since 2000. Also today, my latest video.
CPI inflation softened in January, but it always does when the new year holiday falls in February. PPI has less seasonal distortion, and rose MoM in January for the second consecutive time. The GDP deflator is likely to improve again in Q1. This is about external factors, but deflation is lessening.
My latest video, discussing the cheapness of currencies across the region, why that didn't change in 2025, and why it might in 2026.
A longer note on Korean household savings and consumption. To put that in context, this daily includes charts giving the regional picture over the last 30 years. The only cyclical indicator released today was TSMC's sales for January, which were strong, but might not mean much given LNY distortions.
The BOK recently published some nice research highlighting the rise in the household savings ratio. That is an important phenomenon, helping explain the weakness of consumption, the rise in the current account surplus, and being intertwined with the surge in Korea's overseas equity buying.
Lots of data in Japan today, which again show the cycle warming up, and that Takaichi's economic inheritance is very different from that of Abe almost 15 years ago. Taiwan's trade data are distorted by LNY, so stronger sales to China, and of non-semi products, are interesting, not conclusive.
Takaichi's huge win comes when the cycle is looking stronger, with real wages close to rising, manufacturing sentiment improving and bank lending strong. This should give the BOJ confidence, and, with the current account surplus in 2025 reaching the highest level in forty years, also help the JPY.
The fundamental themes for the region are rising external surpluses, improving manufacturing cycles, and lessening deflation in China. That mix should be helping currencies. The offsetting factors to be monitoring are politics in Japan, flows, and global dynamics around tech and the USD.
Korea's December BOP data show a big CA surplus – but even bigger capital outflows. Japan's exports data for the first 20 days of January perked up, but consumption in December slowed. Also today, a link to the EAE data API, which now allows access to almost 700,000 data series.
Formally launching my data API, which now allows access to almost 700,000 series covering China, Japan, Korea and Taiwan, with monthly, quarterly and annual data.
Korea's current account reached a record high in Q4. But equity outflows, remarkably, increased even more. The balance between the two should diverge through 2026. The CA surplus can be expected to grow on the back of the semi supercycle, while there are four reasons to think net outflow should peak
Weekly flow data show a moderation of overseas bond acquisitions by Japanese buyers – but that don't show whether they are now selling overseas and buying JGBs. FX reserve accumulation in Taiwan remains modest. Inflation fell in January, but that is related to Chinese New Year.
China's S&P services PMI was solid again in January, and Japan's was strong. High-frequency data for China suggest PPI was unchanged MoM in January for the seventh consecutive month. That stability reflects global factors, but also domestic policy, with the PBC last month again increasing liquidity.
A chart pack summarising developments in China and Korea.
Japan's monetary base continues to shrink, though it is still at 90% of GDP. CPI inflation in Korea remains around the 2% target, and given the outlook for exports, is now unlikely to fall further.
Korea's January exports were boosted by workdays and chips. However, the rise in the manufacturing PMIs in Japan, Korea and Taiwan last month suggest some broadening of the cycle. China's PMIs were more mixed. They did show better nominal momentum, but that lift reflected global metals prices.
Regional themes: continuing (and under-appreciated) nominal improvement in China; election uncertainty in Japan; strengthening export momentum in Korea on the back of chips; which in turn looks significant given the huge outperformance of Taiwan through 2025, all because of AI and semiconductors.
Today's official PMIs were below 50. That shows the domestic economy is weak – though the data were likely pulled down by the coming holiday. More interesting was the further rise in prices in manufacturing. That change relates to USD/global prices, but does suggest an upturn in nominal momentum.
Lots of cycle updates today, with all the month-end data for Japan and Korea, as well as Q4 GDP data for Taiwan, which was another blow-out. China's main data release today showed service exports rising, though not nearly as quickly as exports of goods.
With policy efforts reducing headline inflation, the bullish case for Japan is once again a rise in real wages that pushes up consumer spending and aggregate demand. The consumer confidence survey points to just that scenario, but it isn't in the hard data yet, with December retail sales still soft.
Today's data releases show the domestic economy bottoming out, but not yet growing much. The upside risk rests on 1) exports, which the BOK in its last official forecast thought would only grow 1.4% in 2026 and 2) capex, with Samsung and SK Hynix this week pledging big increases.