The population peaked in 2010, and aggregate consumption stopped growing shortly thereafter. With the number of people now set to decline on a continuous basis, can consumption – and thus the broader economy – ever grow again?
Korea's Q2 household debt release is important, given it is such an important issue for BOK thinking about monetary policy in the short-term, and the economy in the longer-term. The structural issues facing Korea are nicely analysed in a BOK report looking at the similarities with Japan.
I've done lots of work comparing China and Japan. Now, the BOK has done the same for Korea. There are clear similarities: demographics, debt, export-led development. It doesn't have deflation, but the scale of reforms the BOK recommends shows a Japanese-style slowdown is a real risk.
I've spent a lot of time in recent years building an infrastructure to analyse the economies of East Asia. Doing so has given me a good understanding of the data challenges in the region. In this video, I discuss those, and introduce the platform I've built to present all the data I've collected.
No major releases today, but a few bits and pieces from China: the falls in interest rates and shifts in loan structure shown in the PBC's Friday monetary policy report; the re-acceleration in auto exports in today's detailed trade data; and signs of capital inflows in Friday's settlement data.
While fundamentals remain weak, onshore China's markets have a tailwind from the H-A premium. In Japan, growth is ok and inflation firm, but the JPY needs more direction from the BOJ. In Taiwan, the export cycle is holding up, which should set the stage for more TWD strength.
Many updates today. In China, property prices and the outlook for CPI, as well as the official activity data for July. The overall tone remains weak. By contrast, the first estimate of Q2 GDP data for Japan was solid. And detailed Q2 data for Taiwan, together with 2H25 forecasts, were more bullish.
The government today confirmed the export surge of 1H – and released much less pessimistic forecasts for 2H. The underlying story is simple: AI-related demand offsetting the impact of TWD appreciation and tariffs. Exports are now expected to grow almost 25% this year, and GDP by 4.5%.
Property prices and sales, investment and retail sales all deteriorated in July. It is at least possible to argue that the worst of the drop in property activity is now completed. That creates room for second-derivative improvement, but even that could be offset by slowing manufacturing capex.
Q2 GDP wasn't particularly impressive at headline level, but the details were firmer, with both consumption and investment rising. The recovery in aggregate consumption does remain sluggish, but that is partly because of population loss. I estimate per capita consumption in Q2 reached a record high.
Price data for Korea's foreign trade shows the same trends as for Japan: import prices falling YOY, and auto export prices dropping MoM. Also, China's monetary and credit data from yesterday. The rise in the credit impulse lost momentum, but stabilisation in the M1:M2 ratio is holding.
Preliminary data show the recent fall in import prices lost momentum in July, but still point to more downside for CPI goods prices in the next 3M. Overall export prices were flat, but for autos show the same sharp decline seen in Japan. Asian auto firms – so farm – are absorbing much of the tariffs
I missed this release earlier today. The rise in the credit impulse stalled in July, dampened by slower government, non-state and mortgage borrowing. However, the monetary data remain a bit more constructive: while the recovery in M1 growth slowed, the bottoming relative to M2 remains intact.
In Japan, July PPI, including export and import prices, as well as the Reuters Tankan for August. In addition, Korea labour market indicators for July.
The rise in optimism that followed the election in early June of a new government isn't yet feeding into a meaningful improvement in labour market data. One of the missing ingredients is that the rise in confidence seen among consumers hasn't yet spread to the corporate sector.
Headline PPI inflation is softening, but a real correction is unlikely without a bigger fall in import prices. In July, import prices ticked up, as did auto export prices, but only slightly. In other data, non-manufacturing sentiment in the August Reuters Tankan remained firm.
There were no data releases today. So instead, an app showing changes in China's global market share; a recap of regional exports, where the standout isn't China but rather Taiwan; and the big shifts in the direction of Taiwan's trade, with surging exports to the US, and surging imports from Korea.
In today's summary, the PPI and CPI data that China released at the weekend, and Q2 current account data from Friday; today's export data from for the first 10 days of August in Korea; and Taiwan's wage data for June.
The export surge is boosting demand for labour, with data today showing manufacturing overtime hours in June near the highest in 15 years, and wage growth of close to 4% YoY. Overall wage growth has also trended up, but less quickly, because the demand:supply balance in services isn't as tight.
After adjusting for workdays, export growth remained solid at around 9% YoY in the first 10 days of August. The growth is all because of semi and ships – exports of other products fell. That perhaps shows an end to front-loading, though exports to the US directly haven't been particularly volatile.
Data themes remain unchanged. As tariffs – perhaps – stabilise, official sentiment is catching up to the data in Japan, with growing concern about inflation. In China and Korea, market sentiment has improved ahead of the data. Given Trump's desire for a deal, that's probably more justified in China.
Today's official data show core CPI has rebounded to almost +1%. That would be an important change, but at best it looks narrow, with almost all the rise coming from "miscellaneous goods and services". The leads from PPI and the PMI remain soft. Separately, yesterday's CA data for Q2 were stable.
Some charts motivated by a nice BOK report on super-ageing; bits and pieces on Japan including the EW survey and recent rice prices; and more crazily strong export data in Taiwan.
The surge in exports continued in July. Exports have now grown 30% just this year, and the trade surplus has risen to 20% of GDP. But the underlying dynamics shifted last month. Rather than semi exports to the US, the big driver was other exports to ASEAN. That looks more like tariff front-loading.
Today's EW survey suggests stabilisation of sentiment following the sharp deterioration through Q1. As that happens and high-frequency price measures stop falling, officials, both on the BOJ MPC and in the wider government, are expressing more concern about the continued strength of inflation.