Asia Pacific News
LAST UPDATE: July 4, 2025
Sri Lanka’s economic outlook positive but global trade concerns pose risks, IMF says
The IMF reports a positive economic outlook for Sri Lanka after its 2023 bailout program but warns that global trade policy uncertainties—especially lingering U.S. tariffs—pose downside risks. Growth is projected at 0–3.5% this year, versus 5% in 2024 (facebook.com, reuters.com).
Insight
While Sri Lanka’s recovery shows resilience, its sustained progress depends on continued IMF-backed reforms. However, external shocks like persistent U.S. tariffs (10% baseline after a prior 44%) could jeopardize this stability, underlining the need for prudent trade and fiscal strategy.
Sri Lanka to make higher payouts on GDP linked bonds, but debt ratio to fall: IMF
Sri Lanka is set to increase payouts on GDP-linked bonds due to growth, while its debt-to-GDP ratio is expected to decline. These developments reflect a trajectory toward stronger fiscal health .
Insight
The rising payouts signal improved investor trust, reflecting that GDP-linked bonds and debt-restructuring efforts are effectively reducing fiscal strain. This progress diminishes the country’s dependence on external financing over time.
Sri Lanka avoids penalties after IMF finds reporting errors
Sri Lanka inadvertently misreported arrears under its IMF program. The IMF granted a waiver for related breaches upon receiving corrected data and assurances that arrears have been addressed .
Insight
The episode highlights ongoing challenges in fiscal reporting accuracy. However, the IMF’s decision to waive penalties reflects confidence in Sri Lanka’s commitment to rectify errors and strengthen financial governance.
Japan PM Ishiba says President Trump may be misinformed on some tariff issues
Prime Minister Shigeru Ishiba suggested President Trump may be misinformed about Japan–U.S. tariffs, pointing out that Japan has indeed imported record volumes of U.S. rice. He added that tariff negotiations are ongoing .
Insight
Ishiba’s response aims both to calm domestic concerns over rice supply and to correct international misunderstandings. His diplomatic candor could positively influence ongoing tariff negotiations with the U.S., scheduled to resolve soon.
Vietnam trade deal takes aim at back door for Chinese goods
The U.S.–Vietnam trade deal imposes a 40% tariff on Chinese goods transshipped through Vietnam—double the 20% rate for standard Vietnamese exports. The measure aims to close logistical loopholes used for tariff avoidance .
Insight
The deal underscores U.S. efforts to curb China’s market access through Southeast Asian intermediaries. It establishes a precedent for stricter enforcement in future trade agreements and signals to other nations that tariff evasion will be more vigilantly monitored.
India cenbank announces seven-day rate reverse repo auction on July 4
On July 3, 2025, the Reserve Bank of India announced a seven-day variable-rate reverse repo auction worth ₹1 trillion (US $11.7 billion) to be held on July 4. Liquidity surplus had reached a three-year high of ₹3.75 trillion, pushing overnight rates toward the 5.5% repo rate(reuters.com).
Insight
RBI is responding to excessive liquidity by draining it, maintaining rate corridor discipline, and supporting policy transmission. It shows vigilance in monetary control to prevent inflation or asset bubbles, even as broader economic conditions remain stable.
India defence panel starts process to buy arms worth $12.3 billion
India’s defence acquisition council has approved initiating procurement of arms and military equipment worth ₹1.05 trillion (US $12.31 billion), following a recent military clash with Pakistan.
Insight
This marks a significant escalation in India’s military preparedness, signaling a strategic pivot toward self-reliance and deterrence. The scale suggests long-term defense modernization efforts, likely boosting domestic defense industry and impacting regional security dynamics.
Indonesia central bank governor says bank will cut rates again to support economy
Bank Indonesia’s Governor Perry Warjiyo stated that the central bank will continue cutting interest rates after two earlier reductions in 2025, aiming to support an economy growing at its slowest pace in over three years.
Insight
BI is prioritizing growth amid subdued inflation and sluggish Q1 performance. The confirmed policy flexibility signals a dovish stance, encouraging lending and investment while monitoring rupiah stability. Markets can anticipate at least two more quarter-point cuts to reach around 5.00%.
Rubio calls off his Japan and South Korea visit, Nikkei reports
U.S. Secretary of State Marco Rubio postponed his first official visits to Japan and South Korea in early July to focus on Middle East affairs, joining a meeting in Washington with President Trump and Israeli PM Netanyahu.
Insight
Pivoting his diplomatic focus suggests U.S. policy prioritization of Middle East tensions over East Asian engagement. It may temporarily shift regional dynamics in Northeast Asia, leaving partners like Tokyo and Seoul awaiting rescheduled outreach amid increasing geopolitical complexities.
