East Asia Econ

Korea – CA surplus of 20% of GDP still doesn't matter

The flow story behind KRW weakness has transitioned from overseas buying by domestic retail to domestic selling by foreigners. Two other factors help inform the exchange rate: correlation with the JPY and, perhaps, a BOK that is late in hiking given the huge acceleration in NGDP growth.

Paul Cavey

Jul 8, 2026 • 2 min read

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East Asia Today

Today, an update on the household sector in Japan with May wage and consumption data. Also, inflation data for Taiwan in June, and the Q1 flow of funds in Korea showing equities now account for 30% of household assets, up from 20% just a year ago.

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Taiwan – real rates universally negative

June's core inflation of 2.3% isn't high in an absolute sense. But outside LNY, it is the highest since the 1990s, and, remarkably, above both the policy rate and 10-year yields. Energy inflation will ease, but with wage growth of 2.7% and rising, and equity prices strong, rates really look too low.

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Japan – wages don't fully explain stronger spending

Today's May consumption activity data were stronger again. That rise can be explained by three factors: a temporary boost as purchases of household appliances are brought forward, decent – though in May, not necessarily stronger – wage growth, and perhaps, a wealth effect as asset prices rise.