There's nothing in the Q2 Tankan to change the BOJ's view of the economy, with sentiment stable, the labour market tight, and inflation elevated. Separately, consumer confidence in June ticked up.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
This week's May service export data suggests the net export contribution might be a bit lower in Q2 than Q1. But it will still be positive, and so boost headline GDP growth in a way that didn't happen in 2023.
The official PMIs for June show China's cycle remains weak, weighed down by construction. There is unlikely to be a recovery until the property cycle stabilises.
Export performance is the most obvious driver of Taiwan's outperformance relative to Korea since the pandemic, but the domestic story has been stronger too.
Today's data releases show stronger Tokyo inflation, headline and core; no big change in the labour market; and a rise in IP.
The official Monitoring Indicator that was updated today through May includes equity prices, but also real economy inputs like IP. It paints a picture of a pretty punchy recovery.
Retail sales in May bucked the weakening of consumer confidence in recent months. That said, real retail sales remain lower than in September 2023. Consumption is still weak.
Business confidence remains weak, and prices haven't fallen back. The one change in the June surveys was a further rise in exporter sentiment. That is starting to look more significant.
If you want to follow just one indicator in China, this is a good candidate. Li Yang has referred to it as "lying flat". If it doesn't change, it is very unlikely the trajectory of nominal growth will either.
After flat-lining for much of 2022 and 2023, China's exports have now risen anew. After rising 20% during the pandemic, volumes have now increased a further 5%. That lift isn't being seen elsewhere in Asia.
With YoY export prices falling, China is exporting deflation. But most of the region has been too. The data continue to suggest export deflation from China is more cyclical than structural.
April SPPI was revised down, but the SAAR through May remains around 4%. With wage growth up, the BOJ's new measures of SPPI by labour content suggest inflation remains well-supported.
There's nothing in the June consumer confidence survey to shift the BOK. Confidence was neither strong nor weak. General price expectations ticked down, but picked up for property.
Employment in May hitting a record high and unemployment edging down to a 23-year low aren't strong reasons to think the tightening cycle is over.
Catching up on wages, inflation, activity and the BOJ. Overall, growth is weaker, and inflation stronger, trends that are likely to intensify after the bank's lack of action earlier this month.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
Given the confidence the bank has been expressing, the BOJ meeting this week was disappointing. By raising the RRR, Taiwan's CBC, by contrast, was somewhat hawkish.
10D prices show YoY PPI is on track to turn positive in June. That might, though, be it: MoM prices have ticked down so far this month, with the YoY rise all about the base effect.
Regulatory changes are causing big swings in deposit data, so caution is needed. But looking at M1 in relation to M2 should cancel some of the noise, so the fall in that ratio is concerning.
A slide pack looking at cyclical and structural issues. The story is strongest in Japan and Taiwan; there's the potential for a break in trends in China; while we find Korea less interesting right now.
In today's Q2 BSI survey, overall sentiment didn't change much. But firms continued to report record levels of worker insufficiency, and capex intentions remained strong.
There's obviously noise from month to month, but the step-change in wage growth since the pandemic – following an earlier acceleration in 2017 – looks to be holding.
On a headline basis, the labour market is tight, but the details aren't so strong. Moreover, while employment hasn't fallen much, it does feel peaky, particularly given the weakness of the cycle.
PPI, as expected, was stronger in May. But any positive impact on market sentiment will be dampened by renewed weakness in core CPI.