Asia Pacific News
LAST UPDATE: July 2, 2025
IMF to provide Sri Lanka USD 350 million after fourth review of bailout
IMF completed its fourth review of Sri Lanka’s $2.9 bn Extended Fund Facility, unlocking a $350 million tranche (SDR 254 million). The support aims to help rebuild reserves and aid in debt restructuring.
Insight
The disbursement reflects steady progress on conditional reforms like cost‑reflective electricity pricing. However, it also underscores ongoing economic hardship and the reliance on continued political and external support to sustain stabilization.
Trump says US could reach trade deal with India, casts doubt on deal with Japan
President Trump said the U.S. is near a trade deal with India, potentially averting India’s tariff increase from 10% to 27% after July 9. He also expressed doubt on any deal with Japan and threatened 30–35% tariffs if no agreement is reached. Only the U.K. has secured a deal so far.
Insight
The focus on India highlights a shift to emerging markets, while the stance toward Japan signals a more confrontational policy with longtime allies. Key sticking points include cars, steel, and agriculture. The July 9 deadline adds significant pressure to finalize these agreements.
RBI Panel Likely to Recommend India Retains 4% Inflation Target
An internal RBI panel is expected to recommend retaining the current inflation target of 4%, with a 2–6% tolerance band, based on the CPI. The existing policy framework is valid until March 2026.
Insight
Retaining the inflation target helps maintain policy continuity and investor confidence. Using CPI ensures broad inflation coverage, though reliance on it may limit flexibility amid food or supply-driven shocks.
Japan Won’t Buy U.S. Products Just for Sake of Trade Balance, Ishiba Says
Japan’s PM Ishiba commented that Tokyo won’t purchase U.S. goods merely to improve its bilateral trade deficit, amid U.S. pressure and tariff threats. Japan will act based on its national interest.
Insight
The statement signals Japan’s intent to resist U.S. demands without strategic grounding. Tokyo is positioning itself to negotiate on its terms, possibly prioritizing industrial and security interests over immediate trade balance fixes.
Trump’s 35% Tariff Threat Feeds Japan’s Worst‑Case Scenario Fear
Trump threatened tariffs up to 35% on Japanese imports after the current tariff pause ends on July 9, heightening Japan’s fears of a full-scale trade war.
Insight
These threats intensify pressure on Japanese negotiators and could prompt Japan to diversify export markets, consider retaliatory measures, or accelerate multilateral trade strategies like CPTPP.
Korea’s Inflation Picks Up, Backing Case for BOK Policy Hold
South Korea’s CPI inflation has accelerated recently, reinforcing the argument for the Bank of Korea (BOK) to maintain its current interest rates. This inflation pickup comes amid concerns over downside risks to the economy and currency volatility.
Insight
The uptick in inflation strengthens the case for the BOK to maintain a steady interest rate to support the won and economic stability, while also keeping the door open for future adjustments depending on global developments.
China says Premier Li to visit Brazil for BRICS summit and Egypt
Chinese Premier Li Qiang is set to attend the 17th BRICS Summit in Rio de Janeiro from July 5–8 and then visit Egypt for talks. Beijing emphasizes the summit as a counterbalance to Western dominance.
Insight
Li’s tour signals China’s aim to project leadership within emerging economies and deepen bilateral relations with both Latin America and the Middle East, reaffirming BRICS as a strategic forum for global south alignment.
Indonesia Raises Budget Deficit Outlook Near 3% Legal Limit
Indonesia’s fiscal deficit is now projected at 2.78% of GDP—up from the original 2.5% target—driven by weak revenues and accelerated spending on large-scale infrastructure and welfare programs.
Insight
The government is walking a tightrope: supporting growth through public investment and social programs but closely managing debt levels to preserve market confidence as it nears the 3% deficit ceiling.
Thai monetary policy must stay flexible as headwinds build, central bank deputy says
Bank of Thailand deputy governor Roong Mallikamas highlighted the need for an accommodative and flexible policy stance as Thailand faces slowed growth (2.3% projected for 2025) due to U.S. tariff uncertainty, political instability, weak consumption, and high household debt.
Insight
The BOT must balance existing rate cuts with caution, keeping rates steady while monitoring downside risks. Additional easing could occur if growth deteriorates further, signaling a proactive central bank amidst turbulence.
Thai Leader’s Suspension Deals New Blow to Battered Economy
Thailand’s Constitutional Court suspended PM Paetongtarn Shinawatra on July 1 over an ethics case involving a controversial phone call with Cambodia’s Hun Sen. Her suspension adds to political instability that is weighing on economic performance.
Insight
The suspension further undermines investor and consumer confidence, compounding existing economic strains from household debt and external pressure. Political volatility may delay fiscal reforms and dampen growth recovery.
Australia retail sales rise marginally in May, boost hopes for rate cut
Australian retail sales rose by 0.2% in May, indicating ongoing weak consumer spending. The increase, driven mainly by clothing, was offset by a rare decline in food sales. Annual growth slowed to 3.3%, the lowest since November 2024.
Insight
The sluggish retail figures strengthen expectations for an interest rate cut by the Reserve Bank of Australia, possibly as early as the next policy meeting, to support demand and counter persistent economic softness.
