Inflationary Pressures in South Korea and Japan

Broadening inflation in South Korea and Japan is prompting ING to forecast rate hikes for the BoK in H2 2026 and the BoJ as early as June. Resilient Korean export prices, particularly in semiconductors, support an upgraded GDP outlook despite currency weakness.

Key Takeaways

• 1.Broadening inflationary pressures in both South Korea and Japan are driving central banks toward rate hikes.
• 2.ING expects the Bank of Korea (BoK) to hike rates twice in the second half of 2026, starting in July.
• 3.The Bank of Japan (BoJ) is likely to deliver a rate hike in June, following hawkish signals from the board and high producer prices.

Table of Contents

• Korea's terms of trade improved sharply, adding to upside risks
• Inflation pressures strengthen while the terms of trade improves in April
• Upside risks for current GDP outlook
• Foreigners selling KOSPI is a key driver of the recent KRW weakness
• BoK/KTB/KRW outlook
• Market rates tend to move ahead of monetary policy cycle
• Hotter than expected producer prices raise odds of June BoJ hike
• Pipeline prices climb in Japan, likely pushing up consumer prices in coming months
• Japanese exporters face challenges managing rising input costs
• BoJ outlook
• BoJ boards turned to more hawkish due to higher inflation

Document Preview

Page 1 of 5

Subscribe for full accessStart Free Trial