This week we turn to ongoing El Niño climate conditions and resulting implications for food prices and policy responses in Asia. El Niño effects have already started to depress crop yields in the region, with major producers such as India reeling from poor rice harvests. Consequent food shortages have exacerbated inflationary pressures in Asia, presenting renewed problems for authorities. Regional governments have responded with a range of measures, from price caps to import subsidies and even outright export bans. The scope for a major response from many governments in the region is limited however by the lack of fiscal policy space. Stimulus programs that were enacted during the pandemic have led to ballooning government deficits and debt in a number of economies in recent years. However, central banks face their own set of challenges too. By tightening monetary policy again to fend off renewed inflation challenges they could further tighten financial conditions, from already restrictive territory, and thereby hasten the onset of recessions.
Introducing
Tian Yong Woon
in:Our Authors
Tian Yong joined Haver Analytics as an Economist in 2023. Previously, Tian Yong worked as an Economist with Deutsche Bank, covering Emerging Asian economies while also writing on thematic issues within the broader Asia region. Prior to his work with Deutsche Bank, he worked as an Economic Analyst with the International Monetary Fund, where he contributed to Article IV consultations with Singapore and Malaysia, and to the regular surveillance of financial stability issues in the Asia Pacific region.
Tian Yong holds a Master of Science in Quantitative Finance from the Singapore Management University, and a Bachelor of Science in Banking and Finance from the University of London.
Publications by Tian Yong Woon
Asia| Oct 09 2023Economic Letter from Asia: Japan Musings
In this week’s letter, we focus on Japan. Investor interest is acute because of the impact of a potential normalization of Japan’s monetary policy, the timing of which is still uncertain. Specifically, we look at recent trends in Japan’s business climate, inflation, and wage growth. We find that while business climate has improved in Japan, wage growth continues to lag inflation, inherently dragging on the Bank of Japan’s (BoJ) desire to see income-led consumption. We also examine Japan’s extensive overseas asset holdings and explore the potential impact on these holdings brought about by tighter monetary policy by the BoJ. We find that while Japan’s investors have been rebuilding their foreign bond holdings over the past year, much of these holdings stand to be unwound should yields at home climb.
Asia| Oct 02 2023Economic Letter from Asia: Some Perspectives on China
China watchers saw reason for some cautious optimism lately, as economic data for August showed signs of growth stabilization. Retail sales and industrial production expanded at a brisker pace, while trade registered reduced rates of decline. Growth in fixed asset investment, however, continued to slow. Additionally, China’s latest PMI readings for September were a mixed bag, as official readings indicated some pick up in non-manufacturing activity, while the Caixin gauge signaled slower growth in both manufacturing and services. Looking further back, China’s GDP growth in Q2 fell short of expectations, as a much-hyped post-pandemic rebound disappointed. Instead, the Q2 growth reading was supported by low base effects from a year ago, during which China enforced strict pandemic-related lockdowns. Regardless, China’s growth for the year has been predominantly consumption-led, while trade acted as a mild drag (chart 1).
Asia| Sep 25 2023Economic Letter from Asia: Some Food for Thought
Investor sentiment has come under pressure following some messaging from the Fed last week to suggest that US interest rates could likely stay higher for longer. As expected, however, Asia’s central banks have held their policy rates steady over the past few days. Additionally, the Bank of Japan (BoJ) left its Yield Curve Control (YCC) parameters unchanged. Meanwhile, in China, banks retained 1-year and 5-year loan prime rates (LPRs) at 3.45% and 4.2%, respectively.
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