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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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Japan – mixed underlying inflation
The April national CPI data only have incomplete hints of the transition the BOJ expects to domestically driven inflation. The more obvious trends for now remain renewed JPY weakness and labour market tightness.
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China – is that it for the export pause?
So far, the much-discussed rise in China's competitiveness has been most obvious in import substitution. With the export cycle now recovering, it is likely this year to also be seen in a renewed increase in China's global market share.
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Korea – no surprises from the BOK
No surprises today from the BOK: it still wants to see inflation come down further. But it was important that the bank once again highlighted upside risks to inflation from "exchange rate volatility".
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Korea – patchy cycle, still no cut
This week's consumer and business surveys show recovering exports, weak domestic sentiment, but firm headline inflation. The BOK is unlikely to shift policy.
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China – the buyers' strike in property
Friday's funding for buying inventories looks small. But with falling price expectations leading to a buyers' strike, it is a step in the right direction. This buyers' strike has cut construction. By keeping savings in the banks, it has lifted the S-I and CA surplus, and lowered velocity and CPI.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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China – property down yet again
Property remains in a deep funk, and while the government talks confidently about a successful transition to new growth engines, all the policy action indicates increasing concern that real estate remains so weak.
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Korea – no change in the labour market
Headline developments in the labour market are consistent with the BOK's outlook for a moderation in tightness. However, the big structural changes – such as the rise in female part rate – mean these headline developments don't tell the whole story.
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Japan – consumption drags down GDP again
GDP contracted again in Q1. The big driver remains the weakness of consumption, dragged down by the weak JPY and inflation eating into real incomes. Partly as a result, it seems to us that the BOJ is signalling it will raise rates more than the market currently thinks.
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China – slide pack
A chart pack laying out our views on China. We argue that deflation is more cyclical than structural; consumption and services have recovered; and that property inventory policy would mean real upside risk.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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China – first-ever drop in M1
The fall in credit in April, while unprecedented, can be argued away as reflecting a temporary shortfall in official bond issuance. It is more difficult to dismiss the equally unprecedented drop in M1 in the same way.
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China – no lessening yet of PPI deflation
CPI deflation is stabilising, though because of food prices rather than domestic demand. The surprise in April was the lack of any lessening of PPI deflation, despite some improvement in leading indicators.
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China – the big shift in consumer behaviour
The big change in household behaviour isn't from spending into saving – in both respects, pre-covid trends have been regained. Rather, the shift is savings into bank deposits and out of financial and property investments. That matters for inflation, and for policy.
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Japan – JPY weakness reinforcing BOJ confidence
It feels to us that, with so much of the market's focus being on $JPY and the MOF, not enough attention has been paid to the increasing confidence being expressed by the BOJ.
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Japan – part-time wage growth at 5%
Part-time wage growth is now finally reflecting the labour market tightness seen in survey data, and so supports the BOJ's confidence in the macro cycle.
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Region – monthly chart pack
Our monthly chart pack. Three themes stand out: the confidence of the BOJ; the significance of policy that tackles property inventories in China; and Taiwan remaining as the big post-covid winner.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.
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Taiwan – finally, some recovery
It has taken a long time, and still isn't powerful, but recovery is finally being seen in the manufacturing PMIs. At the same time, non-manufacturing isn't slowing down much, and price pressures are picking up again. Taiwan doesn't look like an economy where policy is too tight.
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China – property weakness still key
The PBC's Q1 depositor surveys show that it is less consumption sentiment per se that is weak than consumer price and property expectations. In this context, the news that the Politburo is studying ways to reduce property inventories is potentially significant for the macrocycle this year.
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Korea – headline inflation still at 3%
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.
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Japan – understanding the BOJ's confidence
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.
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China – exports lift the PMI
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.
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Last week, next week
A summary of what happened on East Asia Econ last week, and what to look for in the next seven days.