Korea is experiencing a large positive terms of trade. As that isn't being accompanied by any KRW appreciation, the result is enormous growth in KRW nominal indicators. Not all sectors are benefiting. But for monetary policy, the strength of nominal growth is impossible to ignore.

The corporate surplus is surging, and at first glance, that supports the idea that the semi-led cycle won't trickle down. However, while the labour share is falling, the rise in national incomes has been so strong that growth in labour compensation is accelerating. That should support spending.

KRW weakness was blamed on USD strength, then CNY weakness, then JPY weakness. Flows have gone from NPS, to domestic retail, to foreigner institutional. These rationalisations feel a bit like moving the goalposts. But weak KRW does have implications, one likely being a more hawkish BOK.

The rise in inflation is mainly about energy. But that headline inflation is now above 3% YoY – and private services over 4% – also reflects two other drivers: a high starting point, and the rise in chip prices that via cost-push is showing up in the CPI in higher prices for electronic devices.

Two of the key issues for the economy are whether the chip boom trickles down, and what damage the Iran war will cause. April data show a bit of both. ICT capex rose for the third month, and there were more signs of a floor in the labour market. Overall output fell, but remained above the Q1 average

The BOK didn't change rates today, but signalled that despite continued uncertainty, higher rates are coming. The pace will depend on dynamics in the energy and chip markets. I would also be watching for how core CPI performs against the BOK's modest forecast of 2.4%

The BOK's main considerations for policy are growth, inflation, KRW and housing. Three were already pointing to hikes, and tomorrow the bank is likely to raise expected growth above potential too. That makes a rate hike likely. The risk is it still just a bit too early.

Data today for Japan and Korea show the inflationary impact of the War, with import prices in both economies rising at double-digit rates. However, such rises have been seen before. By contrast, export price inflation is setting records, offsetting the hit from energy prices to domestic growth.

March data offer more evidence that the KRW just can't get a break. Finally, retail outflows into foreign assets eased, only to be replaced by huge domestic selling by overseas investors. That has normalised in April, so perhaps investors are realising that a CA surplus of 20%+ of GDP should matter