Alert but not alarmed in North Asia

The technology cycle’s bullish support for corporate activity and confidence appears to be behind an alert but unpanicked business environment in key North Asia economies.

That’s my view after spending a week or so in the region, visiting Hong Kong, Tokyo and Seoul amid developments in the Middle East.

At any other time, there are more things that separate these markets than join them, but not at present. All have a reliance on imported energy that leaves them exposed to this all-encompassing energy price shock. And all are beneficiaries of the artificial-intelligence and data-centre boom that has emerged over the past couple of years.

As I moved through the region, I encountered a lot of discussion on what the crisis might mean over the long term. The mindset is quite analytical.

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I expect, in large part, the impact of the energy crisis will strengthen trends largely already in place. Economies were already building national resilience through industry policy (perhaps with an added focus now on energy independence), reassessing their strategic posture and delaying fiscal repair.

As these trends manifest, competition for resources will increase, adding to a pre-existing tendency for the world to be a bit more inflationary than it used to be.

There is a lot riding on the signs of progress in the Middle East, but for these markets the result will need to be an increased physical flow of oil. The next month or so will be pivotal.

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Looking at specific markets, my impression of sentiment in Hong Kong was noticeably different from the negativity I encountered in 2025. What I saw in the current environment was a better reflection of Hong Kong's historical superpower of adaptability, with a much better tone and vibrancy.

Two themes stood out in Japan: a striking interest in offshore assets, particularly in Australia, and an inflationary environment that is perhaps the most tactile of all the markets I visited. Inflation has been above the Bank of Japan's target for four years. I remain a little bit surprised the approach to policy hasn't been more hawkish. 

The tone in Korea was the most optimistic of the three, particularly around the technology cycle. I suspect time will reveal those upbeat ambitions have been a bit too fulsome.

Richard Yetsenga is Chief Economist and Head of Research at ANZ