South Korea Consumer Prices: Ideas Later.

Consumer prices hit 26-month high, fueling rate hike expectations

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BOK sees inflation remaining above 3% amid prolonged Middle East tensions

Korea's consumer inflation accelerated to a 26-month high in May, driven by soaring oil prices amid the ongoing conflict in the Middle East, reinforcing market expectations that the Bank of Korea (BOK) could raise the base rate in July, market watchers said Tuesday.

Consumer prices, a key gauge of inflation, rose 3.1 percent last month from a year earlier, marking the fastest pace of growth since March 2024, according to data released by the Ministry of Data and Statistics.

The increase was largely driven by higher energy costs.

Prices of industrial goods rose 4.2 percent from a year earlier, while petroleum product prices jumped 24.2 percent, contributing 0.92 percentage points to overall inflation. This marked the steepest increase since a 35.2 percent surge recorded in 2022, following Russia's invasion of Ukraine.

The statistics ministry attributed the rise in consumer prices to a rebound in agricultural, livestock and fisheries product prices, as well as soaring oil costs linked to the conflict in the Middle East.

Market analysts said the stronger-than-expected inflation trend, coupled with the BOK's increasingly hawkish rhetoric, has strengthened the case for a rate hike in the coming months.

The central bank left its benchmark interest rate unchanged at 2.5 percent at its Monetary Policy Board meeting last Thursday, but signaled a more hawkish stance.

BOK Gov. Shin Hyun-song reinforced that message on Monday, saying Korea's stronger-than-expected economic growth poses "fewer impediments" to adjusting monetary policy in response to inflationary pressures.

"(Strong economic growth) gives us a lot more leeway to conduct monetary policy in an effective way to address inflation," Shin said.

Market expectations are growing that the central bank could begin raising interest rates as early as next month.

Park Seok-gil, an analyst at JP Morgan, projected 0.25 percentage-point rate hikes in July and October this year, followed by January and April next year.

"While growth is still led by the tech sector, spillover effects to domestic demand are expected, and demand-side inflation pressures are now being considered a major change," Park said.

Fitch Group also revised its outlook, saying it now expects the central bank to begin its tightening cycle in July and deliver two 0.25 percentage-point rate hikes, bringing the policy rate to 3 percent this year. The forecast marks a shift from its previous view that the BOK would wait until the fourth quarter to start raising rates.

Article source:  https://www.koreatimes.co.kr/economy/20260602/consumer-prices-hit-26-month-high-fueling-rate-hike-expectations

Japan Capital Spending: Jan.- March: Ideas Later.

Japan's capital spending in Jan.-March flat on year

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TOKYO (Kyodo) -- Capital spending by Japanese companies in the January-March quarter was almost flat from a year earlier, in a sign growth led by artificial intelligence-linked investment has slowed, government data showed Monday, as the Middle East conflict further clouds the outlook.

Investment by all nonfinancial sectors for purposes such as building plants and purchasing equipment edged up 0.047 percent from a year earlier to 18.81 trillion yen ($118 billion), a record-high, for the fifth straight quarterly gain, the Finance Ministry said.

Declines in the manufacturing sector, including of information and communication electronics equipment, were offset by gains among nonmanufacturers led by goods rental and leasing, the data showed.

A Finance Ministry official said that for the latest data, no significant impact from the Middle East conflict was observed but added that the government will continue to closely monitor the developments as well as movements in the financial markets.

Tensions in the Middle East have disrupted oil supply and petroleum products to the resource-poor country amid the effective closure of the Strait of Hormuz, with economic indicators showing consumer sentiment worsening.

The United States and Israel launched attacks on Iran on Feb. 28.

In the first quarter of 2026, pretax profits jumped 14.6 percent to 32.63 trillion yen, logging a rise for the sixth straight quarter, with profits by manufacturers of memory and other semiconductor-related devices surging 174.7 percent from a year earlier, it said.

Sales gained 1.1 percent to an all-time high of 408.66 trillion yen, on the back of robust manufacturing demand for AI, data centers and factory automation, it said.

The latest figures will be used to revise Japan's gross domestic product data for the January-March period, which showed the economy grew an annualized real 2.1 percent, marking the second straight quarterly expansion.

Based on the latest data, Takeshi Minami, chief economist at the Norinchukin Research Institute, said he estimates that the Cabinet Office's revised GDP data, to be released on June 8, will likely show a cut in economic growth to an annualized 1.3 percent on a larger fall in private investments.

"For the April-June period, economic growth will likely slow down as the Middle East conflict deteriorates consumer sentiment and is expected to weigh on exports, even as real wages are rising from the year earlier on a slowdown in the increase in consumer prices," he said.

Article source: https://mainichi.jp/english/articles/20260601/p2g/00m/0bu/015000c

Japan Firms and Supply Chains: Ideas Later.

Nearly half of Japanese firms lack supply-chain resilience measures

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TOKYO (Kyodo) -- Nearly half of Japanese companies have not implemented measures to protect their supply chains against disasters and global tensions, according to a recent Cabinet Office survey, raising the risk that factory or logistic shutdowns could halt production and impact the broader economy.

In a survey of 1,759 firms conducted between November and December, only 25.9 percent said they had measures in place to strengthen their supply chains.

Supply chain disruptions have recently prompted some food companies to change the packaging of their products because of concerns over naphtha supplies linked to worsening Middle East tensions.

Japan is prone to natural disasters with major earthquakes having disrupted production in the past.

The government plans to encourage companies to take measures, such as diversifying suppliers and dispersing production sites. A Cabinet Office official said more efforts are needed to "keep economic activity from stopping."

By company size, 26.8 percent of large companies with 1 billion yen ($6.2 million) or more in capital, 49.6 percent of midsize firms and 56.3 percent of smaller firms said they had taken no steps, the survey showed.

It also found larger firms were more likely to adopt measures to strengthen supply chains. Some 45.0 percent for large firms have carried out such steps, compared with 23.2 percent for midsize firms and 21.8 percent for smaller firms.

Among firms that said they were taking steps or were considering them, 57.9 percent cited "diversifying suppliers" as their most common measure. "Risk communication with suppliers" and "cooperation among companies and mutual support" followed, the survey showed.

Article source:  https://mainichi.jp/english/articles/20260601/p2g/00m/0bu/004000c