East Asia Econ

Japan – becoming binary

It is just about possible to defend the BOJ's slow but steady hikes since 2024, in the sense that growth, inflation and the JPY have all been rangebound. But leading indicators for growth and inflation are now rising. I'd expect the bank to now move faster. The market still isn't priced for that.

Paul Cavey

Jul 17, 2026 • 7 min read

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East Asia Today

In China, yesterday's monetary data and today's detailed Q2 GDP release. In Japan, the BOJ's consumer survey showing a further rise in inflation expectations. In addition, a hawkish BOK meeting, motivated by the strong semi cycle, which, with bullishness commentary from TSMC, still seems intact.

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Korea – BOK more hawkish

As expected, the BOK hiked rates by 25bp today. The bank expects 2026 GDP growth to be "considerably" higher than the previous forecast of 2.6%, partly because it expects the cycle to broaden into domestic demand. That will in turn support inflation. Relative to market pricing, that feels hawkish.

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China – M1 growth slowing again

The continued slowdown in credit growth is led by households and CGBs – corporate borrowing has been firm. But the M1:M2 ratio is slipping again, warning that the domestic dynamic that had contributed to lessening deflation and a less dovish PBC is now once again fading.