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Simon Murray, Research Analyst at Westpac, notes that Asian PMIs have begun the second half of 2018 on a soft note as the slowdown through the first half of the year continued into July with most economies recording softer momentum in manufacturing.

Key Quotes

“South Korea’s PMI is back to the moderate levels seen prior to the start of the 2017 uplift, and Japan is trending towards that point as well. Taiwan is also well off its peak, with concerns around trade policy clearly weighing on sentiment.”

“Emerging Asia also saw declines in July, with activity in India and Indonesia easing as their central banks raised interest rates to mitigate global pressures on price (India) and exchange rate (Indonesia) stability.”

“Given the recent BOJ announcement, this Asia PMI update will focus on Japan. The softer PMI read further backs the BOJ’s guidance that policy will need to remain accomodative for some time. However, a period of sustained extremely easy policy can have unintended consequences. The BOJ are aware of this and their recent policy adjustments are an attempt to address potential side effects.”