East Asia Econ

East Asia Today

An update on Japan's fiscal position after the release of the budget for 2026, and detailed data on government interest payments and revenue through Q125. Also, a look at financial stability issues in Korea, and fx reserves and the currency in Taiwan.

Paul Cavey

Jan 6, 2026 • 2 min read

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East Asia Today

Data on FX reserves and PBC liquidity operations in December suggest the PBC balance sheet has become more supportive for growth. The Japan services PMI was weaker, but the commentary doesn't suggest a real change in direction. Services prices suggest core inflation in Taiwan has bottomed.

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Japan – a big budget...but also a budget surplus

Headlines that the FY2026 budget is the biggest ever suit the idea of Takaichi as an Abe-style loosener. However, government expenditure is stable relative to GDP, revenue is rising more, a primary surplus is planned, and though Q125, the government received more in interest than it paid out.

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East Asia Today

Looking through the data releases over the two weeks I've been away, and two themes stand out: rebounding activity, and firmer inflation. Both trends are most obvious in Korea. The picture is more mixed in China, but even there it looks like less deflation through to Chinese New Year.