East Asia Today

Japan's Q2 flow of funds data give an update on several underlying aspects of the economy. Some charts on Korea's 2027 budget. And also, a couple of pieces on Taiwan, covering the CBC's on-hold decision today, and why I thought rates would (should) be higher.

Paul Cavey

Sep 17, 2026 • 2 min read

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Taiwan – on hold

Consensus was right, and the CBC didn't change rates today. The vote wasn't unanimous, with two members voting for a hike. However, some of the property measures were loosened. To me, this suggests that policy is too loose, and thus that the gradual warming up of inflation will continue.

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Japan – FOF trends

Q2 flow of funds: 1) firms remain net savers; 2) the fiscal deficit is under 2% of GDP, and government assets continue to rise; 3) GPIF, foreigners and households are absorbing JGB supply as the BOJ steps back; 4) household equity holdings are up sharply, but mainly because of valuations.

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Taiwan – the fall in real rates

I expect the CBC to hike. That was also my view 3M ago, and then I was wrong, and the strong consensus is that I'll be wrong now too. Underlying my view is that the CBC can't be confident inflation has peaked. Instead, with real rates negative and the TWD weak, price pressures are likely to persist.