The BOJ might well formally change its bond buying programme next week. However, even before that, net buying of JGBs has already turned negative, as the scale of redemptions rises.
The big export growth markets of recent years – autos, BRICs, ASEAN – have lost some oomph. But cyclically, the modest recovery in exports is continuing, particularly in CNY terms.
The BOJ's monthly estimate shows consumption a bit higher in Q2 compared to Q1. But that doesn't change the big picture: consumption is still 4% below the pre-covid peak.
Services inflation will likely ease, but there's upside risk for inflation overall, because of a potentially big rise in exports when import prices are recovering, and unemployment is low.
The step-change in core inflation in Taiwan during covid has yet to dissipate. And it seems unlikely to do so, if the export cycle accelerates as quickly as some of the leads suggest.
Of course, headline data matter. But not as much in Japan as elsewhere. Official data don't suggest a tightening economy, but in the last 6M, the BOJ has nonetheless become more confident that Japan is heading to sustainable inflation. We'd expect more rate hikes soon.
Wage growth in Japan is solid, and the macro backdrop, such as today's services PMI, indicates is probably accelerating. However, the pick-up isn't showing up in all the data.
As with mfg, S&P's services PMI for China remains much stronger than the official version. This gap is, frankly, confusing, though supports the two-speed/muddle-though view of the cycle.
It still isn't clear that PPI deflation is a structural phenomenon. The test will be in the next few months, and whether PPI rises in line with global commodity prices.
Input price data for late May show a rise, validating the increase seen in the PMI. A lot of that is copper, but it should still mean less PPI deflation when data are released next week.
There are some signs of stickiness in services inflation, but May data show that, overall, CPI continues to move in the right direction for the BOK.
Some of the details of today's CPI release are a little concerning, but overall, inflation is receding, with our measures of trimmed mean now below the BOK's 2% target.
Loosening via Pledged Supplementary Lending was one of the hopes for this year, and is part of the official plan to tackle housing inventories. But net issuance fell in May for the third consecutive month.
The regional mfg cycle is recovering, but gaps between official and S&P PMIs mean it is difficult to gauge strength. However, all surveys do point to a broad-based firming in input price inflation.
The official PMI shows that services strength is persisting. And in May, finally, some of the robust manufacturing growth that's been priced by equities is showing up in the data.
With PMIs in TW and KR improving in May, the gap between the S&P and official mfg PMI is probably export-related. Still, the two PMIs do now give very different messages about the strength of the overall cycle.
The rapid rise in the profit share of 2023 hasn't persisted into 2024. But there also hasn't been a decline, so the wage share remains at the lowest since the 1990s bubble.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
The Asian export cycle feels softer than it should be, with the YoY loss of momentum seen again in Korea's FM data for May. The reason is a faltering of the semi recovery, without other sectors taking over.
IP data show the sharp recovery in chip production from early 2023 has lost momentum this year. That is significant for the overall economy when the 80% of manufacturing that isn't semi hasn't yet started to grow.
Data this week show a return to JPY-driven inflation that erodes consumer incomes and spending. But shifts in BOJ language suggest a central bank that is less doveish, a shift that should start to matter for the currency.
Without effective property policy, there is still a mildly positive macro story, based on a rebound in PPI, and stronger exports. The PMI offers support for the first, but not the second.
The fall in the May NBS PMI was surprising, not because activity is robust, but because it isn't typical for the headline to fall when rising input prices in the survey are pointing to a recovery in PPI inflation.
CPI inflation in May in Tokyo continued at the 2-ish% run-rate of the last 6M. But at a headline level, the composition is shifting, away from services, back towards goods. That will further dampen real incomes.
Taiwan must be about the only economy where covid provided a big boost to GDP, a lift that today's Q124 data show once again isn't disappearing.