Rather than a currency crisis, the importance of the weaker JPY for the macroeconomy is via the purchasing power of consumers. In this respect, April consumer confidence isn't too bad: down a bit, but still well up from the lows.
The PBC's Q1 urban depositor survey shows the housing market still hasn't bottomed, with price expectations falling to yet another new low in the survey's history.
Core inflation looks controlled, but headline continues to run around 3%. Leading indicators don't suggest that goods prices pressures are about to subside quickly. One reason is the weakness of the KRW and as a result, our model still isn't flashing the risk of a near term change in policy.
The S&P PMI showed the manufacturing sector grew in April for the first time in two years. But the PMI was still only 50.2. That's not much after such a long recession – and all the excitement about AI.
Headline inflation remains around 3%. But that's because of food and energy. The trimmed mean is now at the BOK's target of 2%.
There is an export recovery, but in value terms it still doesn't look so strong, with full-month YoY growth through April struggling to get much above 10% YoY.
Q124 growth was subdued, but Taiwan must still be one of the few economies both to have grown more strongly during covid, and to have since managed to retain the gains made.
The boxes in the BOJ's full outlook report present a clear explanation of the bank's confidence around wages and prices, and hint at the policy implications.
The mfg PMIs continue to suggest the industrial cycle, in terms of activity and pricing, is through the worst. For now, though, the strength is mainly in exports. As a growth driver, that shouldn't be dismissed, but the upturn would feel more sustainable if domestic indicators were improving more.
Both mfg PMIs for China were above 50 in April. There's some domestic bright spots, but the strength in the S&P PMI is all about exports.
The labour market is tight, profits are up, business sentiment is strong, and inflation is higher. The one area of weakness is consumption, and that has yet to change.
Falling prices are often used as evidence for China exporting overcapacity. But export price deflation is now easing, as the base effect of the big inflation of 2022 fades.
As has been true in Japan, consumer confidence in Taiwan remains inversely correlated with inflation expectations, implying nominal wage growth is too low.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
I suppose it isn't really surprising given exports and the trade balance, but the bounce back in the manufacturing share since the early 2000s is still rather remarkable.
The BOJ didn't change policy, but once again, sounded incrementally more confident, issuing a FY26 core inflation forecast of +2.1%. That outlook makes policy rates still near zero look very low.
Inflation fell sharply in Tokyo in April. The macro story should mean some of the decline is temporary, but it complicates the more bullish story the BOJ wants to tell
Q1 GDP was solid, but the weakness in business sentiment in April makes us feel economic momentum is incrementally weaker. The consumer survey showed price expectations remaining elevated, which fits with weekly price data showing no big slowdown in food or energy price inflation through April.
While not yet certain, it looks like the recent fall in services PPI might be bottoming. That is important for a BOJ that will want to sound more hawkish given rising $JPY.
The NBS's series for 10-day industrial prices 10 suggests overall PPI has stopped falling, though with big differences depending on the commodity.
The drop in services PPI inflation since late 2023 has threatened the BOJ's wage-price narrative. It is important that March data suggest a floor.
Overall consumer confidence is at the average of the last 20 years. But by age, young people are more optimistic than usual, 40-60 year olds much less so.
Unusual domestic strength got Taiwan through the '23 export recession. Exports are now recovering, but consumption is still holding up. That's good news for the economy, bad news for the central bank.
Export volumes haven't responded to JPY weakness, but profits have. That's feeding into manufacturing sentiment, which is better than history, and better than the rest of the world. With services sentiment also strong, the BOJ can continue to argue the macro cycle is warming up.
The flash services PMI remained strong in April, and the mfg PMI lifted towards 50. S&P also reported the survey showing "intensifying price pressures". Japan is heating up.