While the rise in energy prices is already being seen in China's inflation data, it isn't so obvious yet in Japan's. Import prices did rise in March, though so far, the increase isn't exceptional. That said, in level terms import prices remain elevated, and so can continue to pull PPI up too.
Previously, I'd outlined two ways in which Korea was becoming more like the rest of East Asia: lower wage/price inflation, and a structural current account surplus. The analysis above undermines that first element.
Like yesterday's Economy Watchers survey, today's consumer confidence survey shows the potential economic hit from the Iran War. Consumer confidence fell more than 6 points in March, a decline that has rarely been bigger in the history of the survey.
Headline inflation ticked down in March, an inevitable normalisation following the holiday-related spike in February. Energy prices still aren't making a big difference, though the sharp rise in import prices points to that changing during Q2.
If Japan's current account surplus is large by historical standards, then Korea's is truly enormous, reaching over 15% of GDP in February. At the same time, the big offset – retail buying of overseas equities – finally fell back. For a time in February, the currency did look a bit more stable.
Wage growth picked up in February, with scheduled earnings rising more than 3% YoY for the first time since the early 1990s. That will be encouraging for the BOJ, though the bank will be concerned by the sharp fall in today's EW survey, a much bigger drop than seen after last year's tariff shock.
Foreign exchange reserves fell by over USD8bn in March, the biggest drop since 2011. That shows the central bank cushioning some of the depreciation pressure seen elsewhere in the region. Despite the drop, the stock of reserves remains large, and will be replenished by the large trade balance.
The BOJ's proxy for private consumption in GDP in February was weak. That contrasts with the strength of consumer confidence in the early part of the year, and so could have been expected to be temporary.
In the last check before the March CPI and PPI release later this week, the government's 10-day upstream price series at the weekend showed a further sharp rise in the last part of the month. As a result, it can be expected that PPI rose in March YoY for the first time since 2022.
A couple of weeks ago, the BOJ provided a new methodology for calculating the output gap, and at the same time updated the data through September 2025.
Today's S&P/RatingDog services PMI, like the manufacturing PMI of a couple of days ago, gave back almost all of the sharp gains seen in February. So, though it is no big surprise, the economy isn't booming.
Korea's JOLTS data through February released earlier this week point to labour market conditions remaining soft, with the vacancy rate remaining near the lows, and labour market tightness – calculated as the ratio of the openings rate to the unemployment rate – dropping a bit further.
There wasn't much change in Japan's final services PMI from the flash, and together with the manufacturing PMI, the picture painted is of an economy that before the Iran war was on a clear upswing. The conflict is already increasing inflationary pressure, with today's commentary saying:
While PPI will likely rise YoY in March for the first since 2022, the stabilisation of prices actually began in June. One driver has been the rise in import prices, a trend that continued in February.
China's S&P/RatingDog manufacturing PMI dipped in March. With the official version ticking up, the gap between the two measures is no longer as extreme as it was in February. But it hasn't closed entirely, and it is difficult to know which one is telling the "truth".
Taiwan's PMIs dipped in March, but remained at a high level. In the official version, export orders rose to the highest since 2021, and while the out turn in the S&P version wasn't quite as strong, panellists still reported "greater customer demand at home and overseas...especially for…
As it almost always has, the KRW is selling off sharply in a global crisis. But unlike in previous episodes, the macro data don't look weak. Sentiment has become a bit more uncertain, but today's PMI was strong. The driver is exports, which in March rose quickly again,
Korea's data were stronger in February. Production rose, boosted by both industry and construction. Investment was also stronger, as were retail sales.
Taiwan's economy grew around 8% in 2025. According to today's official cycle indicators, growth in early 2026 might have been stronger still.
The BOJ in the last few days has published updated estimates of the neutral rate, revised calculations for the output gap, and new versions of underlying CPI (and discussion of that). The natural rate hasn't changed much.
Industrial profits grew 15% YoY in January-February. Profits can be expected to improve if the firming of upstream prices continues, though in level terms that lift has yet to occur, with earnings still in the range of the last few years.
Consumer confidence in Taiwan tends to be negatively correlated with prices. That remained the case in March, when inflation expectations rose, and sentiment fell.
Japan's exports softened in the first 10 days of March. However, that followed a spike in February caused by Chinese New Year, and so doesn't in itself show a problem with trade.
Taiwan's labour market remains tight, with employment edging up in February, and the unemployment rate dipping to 3.3%. The big change in the labour market in recent months has been the rise in participation, though that is still relatively minor compared with the changes seen in neighbouring…
YoY core services PPI inflation ticked up in February to 2.7%, but the run-rate remains off the highs of 2024, and in sequential terms, SPPI inflation is closer to 2%. Together with goods PPI that was published earlier in the month, overall pipeline pricing points to a moderation in CPI inflation.
