East Asia Econ

China – externally driven inflation

The rise in PPI that continued in May is of macro significance: it is pushing up industrial sector earnings, and the GDP deflator will likely turn positive in Q2. But it is difficult to find signs of domestically generated inflation that would suggest a real upturn in the economy.

Paul Cavey

Jun 10, 2026 • 2 min read

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East Asia Today

PPI inflation in China continues to rise, but CPI is constrained. Imported upstream inflation is even stronger in Japan, but export prices are rising too. The same chip boom that is boosting Japan's export prices is feeding into wages in Korea. TSMC sales rose again in May.

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Korea – not totally K-shaped

The corporate surplus is surging, and at first glance, that supports the idea that the semi-led cycle won't trickle down. However, while the labour share is falling, the rise in national incomes has been so strong that growth in labour compensation is accelerating. That should support spending.

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Japan – import prices up, but export prices too

The renewed rise in import prices is certainly inflationary, especially when the level of prices remains elevated after the hikes of 2021-22. However, this time export prices are rising too, and while that isn't enough to prevent the ToT from falling, it does limit the damage to the domestic economy