Asia Pacific News
LAST UPDATE: June 11, 2025
Japan PM says wage growth better than tax cuts to combat inflation
Prime Minister Ishiba stated that boosting wage growth is more effective against inflation than cutting taxes.
Insight
Ishiba’s emphasis on wage-led income growth over tax relief aligns with Japan’s broader strategy to create a virtuous cycle of consumption and price stability. He highlighted how wage increases better support long-term fiscal sustainability, contrasting opposition calls for temporary tax cuts that could strain public finances. His position reflects concern over debt levels—Japan’s public debt exceeds twice GDP—and aims to reinforce inflation control through domestic income gains (reuters.com, marketscreener.com).
Japan wholesale inflation slows, taking pressure off BOJ
Japan’s wholesale inflation slowed to 3.2% in May, easing pressure on the central bank to tighten monetary policy.
Insight
The slowdown in Japan’s corporate goods price index—from April’s 4.1% to 3.2%—was driven by lower import costs amid a stronger yen. Although price pressures in food and beverages persist, the moderation gives the BOJ room to delay further interest rate hikes. This suggests any future tightening will depend on sustained wage growth and tariff resolution with the U.S. .
Japan’s shift to cashless society prods BOJ call for payment innovation
Cashless payments rose to 42.8% of transactions in 2024, prompting the BOJ to accelerate payment system modernization.
Insight
The rapid increase in digital payments—from 13.2% in 2010—has spurred BOJ exploration of a digital yen and improvements in secure and inclusive payment infrastructure. Officials warned that failure to innovate could erode the yen’s dominance, especially as global central banks pursue CBDCs and stablecoins gain ground .
South Korea Household Loans Climb, Adding to BOK, Regulator Concern
Bank lending to households has climbed at the fastest pace in nine months, intensifying worries among the Bank of Korea and financial regulators over soaring household debt.
Insight
The rapid rise in household loans underscores growing financial vulnerabilities as households ramp up borrowing—driven partly by restrained credit standards and low interest rates. Bank of Korea officials are now under pressure to balance efforts to support recovery with the need to contain debt buildup. The situation could prompt tighter macroprudential rules or a pause in rate cuts to avoid triggering a debt crisis. Regulators will likely monitor property lending closely to prevent targeted risks in household finances.
India, US to Expedite Trade Talks Ahead of Trump’s Tariff Deadline
India and the U.S. plan to accelerate trade negotiations to reach an interim deal before new U.S. tariffs kick in next month.
Insight
The planned expedited talks are a strategic move to safeguard key sectors—such as nuts and auto parts—against a looming reciprocal tariff deadline (July 9). Both nations aim to land “early wins” and pave the way for phased agreements covering market access, digital trade, and non-tariff barriers. New Delhi is leveraging global U.S.–China tensions to secure favorable terms .
Sri Lanka hikes household power tariffs by 15%, power regulator says
Sri Lanka’s power regulator announced a 15% hike in household tariffs, 20.5% for industries, and 20.2% for tourism, effective midnight.
Insight
This tariff hike is a key condition to unlock the next $344 million tranche of the IMF’s $2.9 billion program. The reversal of earlier price cuts reflects cost recovery pressures at the state-run Ceylon Electricity Board. While it may help stabilize public finances, it also risks increasing household and business cost burdens amid ongoing economic fragility (m.economictimes.com).
Cambodia’s Exports to the US Soar as Trump Tariff Hikes Linger
Cambodia’s exports to the U.S. surged 27% in the first five months compared to last year, despite lingering U.S. tariffs.
Insight
The surge indicates significant front-loading ahead of tariff changes, suggesting exporters are trying to beat rate increases. However, sustained tariff pressure (up to 49%) poses long-term risks to the garment and footwear sector. The discrepancy between short-term export gains and looming tariff-related slowdowns raises concerns over future competitiveness in Southeast Asia .
Malaysia trade minister to visit U.S. next week for tariff talks
Malaysia’s Trade Minister Tengku Zafrul Aziz will visit Washington on June 18 to engage in talks regarding U.S. tariffs.
Insight
The visit signals Malaysia’s proactive approach in managing trade friction and preventing new tariffs due in July. It reflects broader diplomatic coordination with Washington while avoiding retaliatory measures. The timing underscores ASEAN’s strategic role in stabilizing supply chains amid rising trade protectionism .
RBNZ Says Adrian Orr Resigned as Governor Over Funding Cut
New Zealand’s central bank confirmed that Governor Adrian Orr resigned in March due to a dispute over a proposed 75% funding cut.
Insight
Orr’s departure highlights tensions between central bank independence and government budget controls. His resignation amid a recession triggered by high rates raises concerns about future monetary policy efficacy. The funding dispute spotlights the importance of adequate resources for macroprudential resilience and systemic stability .
El Salvador passes fiscal overhaul key to IMF deal
El Salvador’s Congress approved a fiscal sustainability law to curb public debt and increase transparency, unlocking IMF funds.
Insight
The new law establishes fiscal discipline through wage bill limits and public spending oversight. It enables an IMF disbursement of around $120 million under a $1.4 billion program. While the IMF praised improved debt projections, the reforms may limit fiscal flexibility, posing political challenges during economic adjustment .
