Japanese money supply growth has been firming gradually, partly reflecting the already-significant QE programme introduced by the previous Bank of Japan (BoJ) leadership. This trend continued for the broader measures in March but the six-month rate of expansion of narrow money M1 fell back – see first chart. Monetary trends remain consistent with an improving economy but have yet to suggest any step change in prospects.
Global markets have risen since last week’s BoJ announcement of additional easing as speculative investors have “front-run” an expected “wall of money” leaving Japan in a desperate search for yield and inflation protection. The latest weekly capital flow numbers, however, show continued Japanese net selling of foreign bonds, although this may reflect seasonal factors – second chart.
Chinese monetary statistics for March were moderately encouraging, showing rises in six-month growth of the key real money and lending measures – third chart. Real M1 expansion remains slightly below its long-run average but may climb further in April / May – base effects are favourable. Economic prospects, in other words, may be improving modestly.
Korean industry is a bellwether of the global cycle and manufacturers became notably more optimistic about export prospects in March, despite a recent yen-driven surge in the won effective exchange rate – fourth chart. Korean export expectations usually track the G7 manufacturing purchasing managers’ survey – a small decline in the new orders component of the survey last month may be reversed in April.
