Asia week ahead: South Korean election and key data from Korea, Japan, China, and Taiwan

Beyond the data calendar, South Korea’s presidential election will be held on 3 June, a key determinant of future economic policy. According to the latest polls, opposition party candidate Lee Jae–myung in the lead. If elected, we expect fiscal policy to become more accommodative, including the introduction of new social welfare programmes. The next government is inheriting a weak and fragile economy.

Exports are expected to drop by 4% year-on-year in May thanks to the blanket 10% US tariff and 25% tax on autos. However, we still believe that information technology exports will continue to increase. Reasons why include no tariffs on semiconductors, favourable price effects and solid global demand for AI investment. Meanwhile, despite falling energy and fresh food prices, inflation is likely to edge up to 2.2% YoY in May. We expect that processed food and service fees rose and that increased input costs will be passed along to consumers.

It’s an important week for Japanese data, including updates on capital spending, labour cash earnings, and household spending. Despite the slowdown in exports, we anticipate a gradual economic recovery, led by firm private spending and investment. We expect equipment investment to rebound in the first quarter of 2025, driven by strong investment in technology. Labour cash earnings are expected to rise following spring wage negotiations. This should lead to an increase in household spending. We continue to believe that private consumption will be the main driver of overall growth in the second quarter.

China’s purchasing managers’ index, out Saturday, will set the tone for the week ahead. We expect the official manufacturing PMI to recover on the month, thanks to the tariff ceasefire, rising from 49.0 to 49.6. The new orders subindex is likely to be watched closely. The non-manufacturing PMI is likely to remain in expansion as well on the month. The Caixin manufacturing PMI data follows on Tuesday.

Taiwan releases its May consumer price index inflation data on Thursday. We are looking for inflation to cool to 1.8% YoY. Prices have been coming in a little hotter than expected the past few months. Even if the May number cools, we expect the central bank to remain on hold in June.