Last week, next week

This is what happened on East Asia Econ this week.


I spent most of last week catching up after being away the previoius week. There was more time to do so than usual, given China was preoccupied with the 20th party congress, an event that seems to have put a stop to new economic data releases. It should be busier again next week because the flow of statistics will (presumably) resume, and there will need to be a lot of thinking done about the implications of the congress. Two developments at the meeting in particular stand out. First, the increased dominance of both Xi Jinping over the party, and the party over the government. The likely new premier has no experience of national policymaking, seemingly owing his rise solely to his close relationship with Xi. Second, not only premier Li Keqiang but other experienced policymakers will be leaving the administration. It is unclear whether the policy priorities of these outgoing officials, such as improving the business environment for companies and trying to reduce leverage, will live on.


A lot of Japan data has been released the last few days. The EW survey suggests the economy is growing, but slowly. Inflation is rising, dampening consumer sentiment, and manufacturing sentiment has weakened, but there's some offset for growth from post-covid normalisation. MOF intervention clearly shows that policymakers aren't comfortable with the dramatic pace of JPY depreciation, but this economic picture doesn't suggest the BOJ will yet be forced to abandon YCC in response.


Korea is starting to look a bit less inflationary, with import price inflation easing, and the labour market no longer tightening. But the BOK remains hawkish, worrying that the weakness in the KRW will drive inflation higher. Exports fell again in the first 20 days of October, and excluding ships, are now down almost 20% from the peak. So far, the weakness is concentrated in shipments to Asia. The real risk is sales to DM will be the next shoe to fall.


Unsurprisingly, export orders fell YoY in September. The weakness remains concentrated in demand from China. Orders from the US and EU have so far remained elevated. The risk is that this demand from DM will be the next shoe to drop.

Next week

Next week's policy highlight will be the BOJ meeting, and whether the bank does anything to monetary policy to try to put a floor under the JPY (unlikely). For China, last week's delayed data will likely emerge (September activity, September foreign trade, September property prices). Korea will release consumer confidence and business sentiment, which will likely show a further fall in inflation expectations and deterioration in confidence. In Taiwan, there is September labour market, retail sales and IP, as well as Q3 GDP.