Japan’s economy grew last quarter
Japan’s economy expanded at an annual rate of 3.1 percent in the April-June period, rebounding from a contraction in the previous quarter, according to the latest government data.
The world’s fourth-largest economy grew 0.8 percent in the fiscal first quarter, driven by solid consumer spending and business investment.
Seasonally adjusted gross domestic product (GDP) measures the value of a nation’s goods and services. In Japan, domestic demand grew by 3.5 percent from the previous quarter, fueled by robust household consumption, private sector investments, and government spending. Exports also saw a significant increase, growing by 5.9 percent.
Japan’s GDP had contracted by 0.6 percent in the January-March quarter, following a modest 0.1 percent growth from October to December. Over the past year, Japan’s economic growth has fluctuated between periods of contraction and weak expansion.
Economic growth in major Asia-Pacific economies
International researchers revealed that there are signs of recovery in exports, but this is not broad-based. China’s year-on-year GDP growth trended up marginally to 5.3 percent in Q1/2024 from 5.2 percent in Q4/2023 and 4.9 percent in Q3/2023. In addition to fiscal stimulus launched in March 2024, stronger economic momentum was underpinned by exports of goods, which grew by 1.5 percent in Q1/2024 after five consecutive quarters of contraction. Relatively robust exports also supported faster or strong GDP growth in the Republic of Korea, Singapore and Viet Nam, which expanded by 3.4 percent, 2.7 percent and 5.7 percent in Q1/2024, respectively. Nonetheless, such export revival was not region-wide, with countries such as Azerbaijan, Bangladesh, Indonesia, Malaysia, Nepal, Philippines and Sri Lanka still experiencing export declines in the past several quarters. Supported by steady employment and moderating inflation, private consumption drove GDP growth where exports remained subdued. Monthly retail sales in Q1/2024 in countries such as Azerbaijan, Indonesia, Kazakhstan, Malaysia, Russian Federation and Uzbekistan were rather stable. Tourism also played a role in sustaining private consumption, especially in countries where tourist arrivals as of late 2023 already returned to the pre-COVID-19 pandemic levels, such as Armenia, Fiji, Georgia, Kyrgyzstan, Maldives, Mongolia, and Türkiye. Meanwhile, quarterly data on capital investment suggests a mixed picture. In Q1/2024, total investment held back GDP growth in the Republic of Korea, while investments in China’s real estate development dropped by 9.5 percent. In contrast, infrastructure investment in India is likely to remain strong during the same period.
Furthermore, inflation continued to trend down in several economies, reaching the median value of 3.4 percent in March 2024. Deflation was recorded in Armenia and Thailand. In addition to these two countries, overall inflation is within or below the official targets in countries such as Azerbaijan, China, Georgia, India, Indonesia, Kyrgyzstan, Mongolia, Nepal, Philippines, Tajikistan, and Sri Lanka. As such, the policy rates in around half of countries in the region were kept unchanged in Q1/2024 while several North and Central Asian economies announced rate cuts. Yet, food inflation has risen from the median value of 3.8 percent in January 2024 to 5.3 percent in March, partly due to increases in global prices of meat, dairy products, and vegetable oils. While global rice prices declined slightly in Q1/2024, this followed a nearly 20 percent increase in 2023 which particularly affected many economies of the region where rice is a staple food item. More broadly, higher food prices could dampen essential consumption in Bangladesh, Lao PDR and Myanmar where food consumption accounts for at least half of total consumer expenditure. Some economies continue to experience high inflation. Türkiye’s inflation has trended up and reached 69 percent in March 2024. In response, the policy rate was raised to 50 percent in April compared to 42.5 percent at end-2023. Latest monthly inflation also remained high in the Islamic Republic of Iran (35.8 percent), Lao PDR (25.0 percent), and Pakistan (20.7 percent).
LI Qiang’s 3-nation visit: implications for Asia-Pacific region
Chinese Premier Li Qiang has wrapped up a three-nation tour to New Zealand, Australia and Malaysia, a visit that analysts say highlights China’s efforts to further strengthen ties with countries in the Asia-Pacific region amid rising economic and security challenges. What were some of the major outcomes of the premier’s visits to the three countries? What can we expect in the improvement of bilateral ties? And how does the future of prosperity and stability look in the Asia-Pacific region? Guests in this edition of Dialogue are Prof. Chen Hong, director of the Australian Studies Center at East China Normal University; Prof. James Laurenceson, director of the Australia-China Relations Institute at the University of Technology Sydney; and Dr. Syed Mahmud Ali, distinguished fellow with the Centre for New Inclusive Asia.
Carbon capture in Asia-Pacific
The Asia-Pacific region is progressively engaging in the development of carbon capture, utilization and storage (CCUS) technologies, an essential response to the demands of the global energy transition.
However, projects in this region, which includes countries such as Australia, China, Malaysia and Indonesia, face major challenges, including high capture costs and incomplete regulatory frameworks.
At present, natural gas processing accounts for 34 percent of planned CO2 capture capacity, followed by coal-fired power generation and hydrogen production. However, capture costs, which can represent between 60 percent and 70 percent of total project expenditure, pose significant challenges. The break-even point is estimated at around $100 per tonne of CO2, making these projects difficult to finance without substantial financial backing.
Bangladesh gets a political reset, but big economic problems remain
The past few years have been a season of misery for several South Asian economies. Sri Lanka defaulted on its debts in 2022, sparking an economic crisis that resulted in a catastrophic 7.3 percent decline in GDP and a further 2.3 percent decline in 2023. Pakistan managed to avoid a crisis on that scale but is nonetheless in poor economic shape: growth is anaemic, inflation remains high, and its foreign debt, though not as burdensome as Sri Lanka’s, remains a major threat to macroeconomic stability.
In both countries, economic turbulence was intertwined with political upheaval.
Now it’s Bangladesh’s turn, where the government of Sheikh Hasina and her Awami League, which seemed unbudgeable, was toppled by student protests. Long a poster child for economic development in the region, Bangladesh has been struggling recently. As in Sri Lanka and Pakistan, the twin shocks of the COVID-19 pandemic and the war in Ukraine hit Bangladesh hard.
Bangladesh’s GDP growth, which had been running persistently between 6 percent and 8 percent between the end of the global financial crisis and the start of the pandemic, is now forecast to drop below 6 percent both this year and next. The national currency, the taka, has dropped sharply against the dollar, loans are falling due to Bangladesh’s many emblematic megaprojects, and parts of the banking sector look shaky.
