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The labour market is fairly tight, and the gap between demand and supply is continuing to narrow. But the pace of tightening is gradual, and doesn't seem likely to create a lot of wage inflation any time soon.
With respect to activity, the BOJ Tankan sends a somewhat mixed message, with sentiment stable, and capex quite strong. On inflation the survey corroborates the message of other leading indicators, suggesting that the acceleration in CPI is losing some momentum.
Activity in Korea continues to hold up reasonably well. There are some signs of inflation peaking, which might be important for the BOK, but not until later in the year at the earliest.
The PMIs rose in June, but the neither the size of the improvement nor the details of the surveys suggest that the economic recovery out of Covid will be particularly strong.
Not only were the headlines in the PBC's quarterly sentiment surveys weak, but so were the underlying indicators that usually lead the overall economy. With little resilience in these indicators, the pace of recovery from the covid lockdowns looks likely to remain modest.
The negative link between consumer confidence and inflation is probably the clearest example of JPY weakness being bad for the economy. However, before this affects the BOJ, the bank will likely want confirmation that this link can't be broken by the stalled restart of services activity after covid.
Consumer confidence fell sharply in June, as inflation expectations surged. The BOK will be remaining hawkish for the time being.
Today's trimmed mean measure of CPI is broadly consistent with the BOJ's assessment that inflation in Japan still lacks broad-based momentum.
Our FCI remains accommodative. That, depressed activity, the fall in covid cases and a corporate sector that is somewhat of an even keel should ensure modest recovery. However, without a clearer policy push from the government, a real surge in growth in 2H feels unlikely.
That industrial profits fell in May isn't a surprise. But the fall was fairly modest, and revenue remains on an upwards trend, with corporate earnings likely being helped by the strength of commodity prices in recent months.
The acceleration in inflation of the last few months stalled in May, with both core and headline unchanged. The leading indicators aren't yet suggesting a re-acceleration, with a softening of commodity prices offsetting the weakness of the JPY.
As with other inflation indicators, May service PPI shows price pressures running at multiyear highs. But the pick-up of the last couple of months is narrow, concentrated in international transport costs, which in turn related to the rise in energy prices.
The fall in exports in June might reverse in the next couple of months as China reopens after the covid lockdowns. But even if that occurs, it would likely be a temporary boost, with leading indicators for the next 6M all pointing down.
The BOJ is under pressure, but Japan isn't in crisis. Rising energy prices hurt, but ending YCC would be painful too. Instead, it is probably better to focus on economic normalisation post-covid. That would likely include an influx of tourists concluding that, with the JPY at 135, Japan is cheap.
Orders data continue to suggest that Taiwan's headline export growth slows towards zero in the next 3-6 months. That probably represents a best case outcome for export data for the rest of the region.
Covid numbers have fallen, which is good news for the cycle, given the government continues to make clear that zero covid is a pre-condition for everything else. Economic activity is recovering, but so far, the lift seems modest.
The BSI survey suggests that the economy remains on a recovery path. There aren't signs of a big acceleration in growth, but nor are there indications that the headwinds in the world economy and depreciation of the JPY are causing Japanese firms to turn pessimistic.
The BOJ didn't move today, and while the central bank is facing strong market pressure to move, so far at least, there's not so much domestic political pressure.
Exports in volume terms remain elevated compared with history. But JPY weakness means a lot of variation in export values, and also a rapid rise in the import bill.
Given everything else we already knew about May, it wasn't surprising that property prices were also weak last month. However, there needs to be a turnaround soon to think the correction is just cyclical rather than structural.
The labour market release for May was strong, and will keep the BOK hawkish.
Machine orders in April were surprisingly strong, and suggest some resilience in both exports and domestic capex.
The May activity data release didn't surprise. Most of the data were better than April, but not all. GDP may have grown YoY in May, but only just. Overall, the economy is recovering, but is still weak.
China remains on course for modest recovery. Covid-19 remains a downside risk, while the upside is muted without clearer policy support.
Just as the overall sentiment has passed through peak pessimism, so the credit cycle has lifted from the trough. But the credit data in May were mixed, and absent the emergence of a significant source of demand, the upside for credit is likely limited.