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.
There was a bit of pick-up in IC orders in March, but not by enough to lift total orders, which have yet to regain 2023 levels. The export recovery remains sluggish.
Relative to history, business sentiment in Japan is the strongest among most major economies in both mfg and non-mfg. That's only been seen once before.
Japan's export volumes to China are still almost 20% below the peak. Nor surprising, when the only strength in China's imports is primary goods and semi.
Korean exports are recovering. But at 5-10% YoY, growth doesn't yet look strong enough to offset weakness in the domestic economy.
Cyclically, China's exports are improving, but the lift doesn't look particularly strong yet. Structurally, too, recent export performance has been a little underwhelming.
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
There's quite a contrast between the sense of domestic manufacturing capex boom, and the lack of any rise in imports of capital goods outside of semi.
There are many reasons to expect a new wave of Chinese EVs to the world, but the last one arguably peaked in 2022, and another has yet to appear.
TSMC yesterday was less bullish on semi as a whole in 2024, but its own unchanged sales outlook still suggests a strong year for Taiwan exports
It still isn't even at 0.2% YoY, but rental CPI is now rising the fastest since the 1990s, which is pulling up imputed rent too. Together, they account for almost 20% of the basket.
We estimate that sequential core CPI inflation turned negative in March. The macro backdrop suggests that should be temporary, but uncertainty about the real strength of the domestic inflation dynamic constrains the BOJ's ability to respond to the unhelpful weakness in the JPY.
It is remarkable, given the big mortgage rate cuts and everything else thrown at the property market, that buyer sentiment just gets worse and worse.
The belated release of the PBC's consumer survey continues to show falling price expectations, and so hint at rising real rates.
The cheap JPY isn't boosting Japan's merchandise exports, but it has helped with a sharp recovery in tourism, even though arrivals from China remain subdued.
The recent recovery in the mfg cycle has been underwhelming. One reason is its narrowness: sales at TSMC are up, but for the rest of the listed are flat.
The shunto is important for regular workers, but part-time workers are now also getting decent pay rises, a real sign that the labour market is tightening.
The cheap JPY is boosting Japan's tourist inflows, but there continue to be no signs of the currency helping merchandise exports.
China doesn't release detailed GDP by expenditure data, but the available snippets show Q1 outperformance was due to net exports.
Consumer sentiment does remain low in China, but it is encouraging that income growth has picked up, while the savings rate is coming down.
The consensus on China has improved in recent weeks, but there's nothing in the Q1 activity release to reinforce that shift.
There's just no floor for property. Starts fell again in March and are now 65% below the 2020 peak, and barely above the low of late 2008.
There's a growing divergence between ferrous and non-ferrous metals, and that shows the contrast between weak property and strong manufacturing activity.