Asia Pacific News
LAST UPDATE: June 3, 2025
China Private Factory Gauge Plunges to Weakest in Over Two Years
China’s Caixin manufacturing PMI fell to 48.3 in May, the lowest since September 2022, indicating a contraction in factory activity.
Insight
The decline in China’s private manufacturing sector highlights the challenges faced by smaller exporters amid ongoing trade tensions and weak domestic demand. Despite a truce in the trade war with the US, higher tariffs continue to impact the sector. The contraction suggests that China’s economic recovery remains fragile, and further stimulus measures may be necessary to support growth. The disparity between private and official PMI readings also points to uneven recovery across different segments of the manufacturing industry.
BOJ’s Ueda signals readiness to raise rates if growth re-accelerates
BOJ Governor Kazuo Ueda indicated that the central bank is prepared to raise interest rates if economic and price growth re-accelerate after a recent slowdown.
Insight
Ueda’s comments reflect the BOJ’s cautious approach to monetary policy amid global uncertainties, including US tariffs. While headline inflation remains above the 2% target, underlying inflation driven by domestic demand and wages is still below target. The BOJ plans to continue tapering its bond purchases, signaling a gradual withdrawal from ultra-easy policy. However, the timing of rate hikes will depend on future economic and price developments, highlighting the central bank’s data-dependent stance.
BOJ’s Ueda says economy can withstand hit from US tariffs
Governor Ueda expressed confidence that Japan’s economy can weather the negative effects of US tariffs, citing strong corporate profits and a tight labor market as buffers.
Insight
Despite acknowledging that US tariffs could deter exports and investment, Ueda emphasized Japan’s resilience due to high corporate profits and a tight labor market supporting wage growth. He noted that while recent trade tensions have had a larger-than-expected impact, the BOJ expects inflation to gradually approach its 2% target. Ueda refrained from detailing the timing of the next interest rate increase, indicating that decisions will depend on future economic and price trends.
Lutnick Sees US-India Trade Deal in ‘Not-Too-Distant Future’
US Commerce Secretary Howard Lutnick expressed optimism about finalizing a trade agreement with India soon, aiming to strengthen strategic and economic ties.
Insight
Lutnick highlighted that both countries are working towards a $500 billion bilateral trade target, with negotiations placed on a “fast track.” He acknowledged past US concerns over India’s arms deals with Russia but noted a shift towards increased cooperation. The positive relationship between Indian Prime Minister Narendra Modi and former US President Donald Trump is seen as a factor in improving ties. The potential agreement is expected to enhance cooperation and open new opportunities in commerce between New Delhi and Washington.
Bangladesh Narrows Fiscal Deficit, Cuts Spending in Budget
Bangladesh’s interim government presented a budget for fiscal year 2025–26, reducing the fiscal deficit target to 4.6% of GDP, the lowest since 2015, and cutting spending.
Insight
The budget reflects Bangladesh’s efforts to stabilize its economy amid challenges following a mass uprising in 2024. By lowering the deficit and reducing spending, the government aims to boost investor confidence and maintain fiscal discipline. The emphasis on increasing revenue collection indicates a focus on sustainable economic management. However, the reduced spending could impact social and development programs, necessitating careful balancing of fiscal consolidation and growth objectives.
Global Trade War to Hurt Demand and Growth, RBA Chief Economist Says
RBA Chief Economist Sarah Hunter warns that escalating global trade tensions, particularly due to higher US tariffs, could dampen global demand and economic growth.
Insight
Hunter emphasizes that increased US tariffs may lead to a decline in global demand, affecting Australia’s export-driven economy. The uncertainty surrounding trade policies could result in reduced business investment and consumer spending. While Australia’s exporters are relatively well-positioned, the broader economic implications necessitate cautious monetary policy. The RBA is likely to monitor these developments closely to mitigate potential adverse effects on the Australian economy.
Australia central bank pondered outsized rate cut in May, decided to be predictable
The Reserve Bank of Australia considered a significant 50 basis point rate cut in May but opted for a more cautious 25 basis point reduction to maintain policy predictability amid global uncertainties.
Insight
The RBA’s decision reflects a balance between addressing domestic economic conditions and responding to external risks, such as heightened US tariffs. By choosing a moderate rate cut, the RBA aims to support economic growth without triggering market volatility. This approach underscores the central bank’s commitment to a measured policy path, ensuring flexibility to adjust as global economic dynamics evolve.
Australia raises minimum wages by 3.5% as inflation eases
Australia’s Fair Work Commission announced a 3.5% increase in the national minimum wage, effective July 1, 2025, benefiting approximately 2.6 million low-wage workers.
Insight
The wage hike comes as inflation eases to 2.4%, within the Reserve Bank of Australia’s target range, providing a real income boost to workers. This decision aims to prevent the permanent erosion of real wages due to past high living costs. While the increase supports low-income earners, it also reflects confidence in the economy’s resilience amid global trade uncertainties. The move may influence monetary policy decisions, balancing wage growth with inflation control.
Mongolia PM resigns after anti-corruption protests
Mongolian Prime Minister Luvsannamsrain Oyun-Erdene resigned following weeks of anti-corruption protests sparked by allegations of lavish spending by his son.
Insight
The resignation underscores the impact of public outcry against perceived government corruption and inequality. The protests, led by young citizens, highlight growing demands for transparency and accountability in Mongolia’s political landscape. The situation reflects broader regional trends where public dissatisfaction with elites leads to significant political changes. Oyun-Erdene’s departure may prompt reforms aimed at restoring public trust and addressing systemic corruption.
