Asia Pacific News
LAST UPDATE: July 25, 2025
Sustaining Sri Lanka’s reforms critical to safe‑guarding macroeconomic stability, IMF says
After IMF staff concluded its visit to Sri Lanka under a $2.9 billion programme, the IMF emphasized that continuing economic reforms is vital to protecting macroeconomic stability. Growth is forecast at 5 % in 2024 and 3.5 % in 2025, but downside risks have risen due to high U.S. tariffs, trade policy uncertainty, and geopolitical tensions (arcamax.com, Reuters).
Insight
The IMF is flagging that despite the economy’s recovery and improving fundamentals, Sri Lanka remains exposed to external threats—especially looming U.S. tariffs on exports. Without sustained reform momentum and fiscal discipline, the country’s resilience to shocks could quickly erode.
Japan says profits from US investments in trade deal to be shared according to contributions
Japan clarified that profits from the $550 billion U.S. investment package under the new trade deal will be shared proportionally to each country’s contribution and risk. Contrary to earlier claims that the U.S. would keep 90 %, Japanese officials said private‑sector players will determine the distribution based on involvement and risk (Reuters, AOL, X (formerly Twitter)).
Insight
By emphasizing proportional sharing rather than a fixed allocation favoring the U.S., Japan aims to manage public perception and assert that its firms retain agency over returns. It also avoids political fallout from seeming concession in negotiations.
Core inflation in Japan’s capital stays above BOJ target in July
Tokyo’s year‑on‑year core consumer inflation (excluding fresh food) slowed to about 2.9 % in July (from roughly 3.1 % in June), yet remains significantly above the Bank of Japan’s 2 % target. The BOJ is expected to revise up its inflation forecast at the upcoming July 30–31 policy meeting, though rates will likely be held unchanged (Reuters, Bloomberg.com, CNA).
Insight
Persistently high core inflation pressures may force the BOJ to alter guidance, even if it holds rates steady. This reflects underlying cost pressures that could erode household purchasing power and complicate its ultra‑accommodative policy stance.
US, Korea Reaffirm Pledge to Reach Trade Deal Before Deadline
The U.S. and South Korea reaffirmed commitment to finalize a mutually beneficial trade agreement before the August 1 deadline, when new duties are set to take effect. Discussions focus on aligning manufacturing cooperation to trim tariffs on Korean products (Bloomberg.com, Ground News, Bloomberg Law).
Insight
With duties set to rise on August 1, the U.S. and South Korea are accelerating trade talks, emphasizing the importance of reaching an agreement swiftly. South Korea is conscious of competitive pressures from Japan and aims to lock in favorable terms in time.
Thailand, Cambodia exchange heavy artillery as fighting expands for second day
On July 24–25, heavy artillery exchanged between Thai and Cambodian forces along their disputed border escalated into the worst clashes in over a decade. At least 16 people have died and over 130,000 civilians displaced. Fighting has spread to multiple flashpoints, and rhetoric has sharply escalated despite international calls for calm (MarketScreener, Reuters, Reuters, Reuters).
Insight
The violence underscores long‑standing territorial tensions and shows how quickly local incidents can escalate into large-scale displacement and regional instability. Both governments have adopted hardened positions, complicating third‑party mediation prospects.
US lifts sanctions on Myanmar junta allies after general praises Trump
The U.S. Treasury removed sanctions on several individuals and companies allied to Myanmar’s ruling junta following a letter from General Min Aung Hlaing praising former President Trump. The move occurred two weeks after the letter requested reductions in export tariffs and economic opening (Reuters, www.ndtv.com, Arab News).
Insight
This sanction reversal appears directly tied to personal political flattery, raising concerns about U.S. sanctions policy integrity. It may embolden the junta to leverage political messaging for diplomatic and economic gains.
Trump Hails Australia’s Move to Ease US Beef Curbs in Trade Thaw
President Trump praised Australia’s decision to relax biosecurity restrictions on U.S. beef imports. He said the U.S. would sell “so much” beef to Australia, framing it as a proof of U.S. beef’s quality and safety. Australia clarified the change was based on scientific review, not tied to trade negotiations (Bloomberg.com, Reuters, AP News, Bloomberg Law).
Insight
Trump portrays the move as a diplomatic win and symbolic trade thaw; Australia emphasizes science-based reasoning to reassure domestic stakeholders. The episode highlights how trade moves can carry outsized political symbolism.
Australia should compromise to reach EU trade deal, minister says
Australian Trade Minister Don Farrell urged that Australia should accept compromises in ongoing negotiations with the EU to resurrect a stalled free‑trade deal. He said an agreement would showcase Australia’s commitment to open trade and mentioned talks with India and the U.S. are also advancing (Reuters, MarketScreener).
Insight
Faced with global protectionist trends, Australia is pushing for trade diplomacy through compromise. Farrell positions this as strategic: signalling flexibility while balancing agriculture, mining, and industry interests.
Australia, India Likely to Expand Free Trade Pact, Minister Says
Australian Trade Minister Don Farrell said that Australia and India are likely to expand their free trade agreement in the “very near future”, advancing negotiations that were delayed by Australia’s election.
Insight
This forthcoming expansion builds on the 2022 “early harvest” deal, with aims to deepen economic ties by including sectors like critical minerals, agriculture, services, and green energy. The move reflects how both countries seek to enhance strategic economic partnership amid global uncertainty.
India’s RBI won battle against inflation but war continues, central bank chief says
RBI Governor Sanjay Malhotra stated at a Financial Express event that while the Reserve Bank has “won the battle against inflation,” the broader war continues as price stability remains its central goal. The RBI cut rates by 50 bps in June, adopting a “neutral” stance, signaling limited easing ahead despite retail inflation hitting a six-year low.
Insight
Malhotra emphasized a forward‑looking monetary policy that balances inflation control with growth support. The shift to a neutral stance raises the bar for further easing, reflecting caution over weakening demand even as rate cuts aim to energize growth.
