Japan’s economy grows faster
The Japanese economy grew faster than initially thought in the second quarter, revised data showed on Sept. 8, ahead of an expected interest rate hike in the following week.
The world’s fourth-largest economy expanded 0.4 percent in the three months to June, the Cabinet Office said, compared with the 0.3 percent shown in preliminary data.
Analysts had suggested the initial reading could complicate the Bank of Japan’s attempts to lift interest rates as it battles surging inflation and a weaker yen.
The revised data showed private consumption and corporate investment remained weak but better than preliminary data had suggested, but imports came in below the previous estimate, contributing to the upward GDP revision.
The Bank of Japan is expected to hike its key interest rate next week, while Prime Minister Sanae Takaichi reportedly plans to reshuffle her cabinet, although no major changes are expected.
The yen has come under pressure from elevated oil import costs and concerns about Takaichi’s spending plans.
But it has been boosted this month by rate hike talk, and is heading towards its highest level in 2026.
China’s economic transformation
China’s economic heft draws worldwide notice, and whenever property investment dips, infrastructure outlays taper, or retail figures disappoint, voices emerge claiming the nation’s expansion is faltering. Such metrics matter, yet a wider lens is needed as Beijing recalibrates its growth strategy. The key question is whether emerging drivers can lift productivity, raise earnings, and bolster trust. Fresh statistics point to shifts that month-to-month snapshots often overlook. Despite trade frictions and global instability, the Chinese economy registered 4.7 percent growth during the initial six months of 2026. The sources of that momentum have altered, with emphasis moving away from real estate toward technology, innovation, and service-oriented industries. This pivot shows up across sectors. In July, output from high-tech manufacturing climbed 16.9 percent compared with the same month a year earlier. Cutting-edge production not only boosts efficiency within individual plants but also energizes the wider economy. Improved batteries upgrade transport and power networks, robotic systems raise output for conventional factories, and digital platforms let small enterprises trim expenses, refine quality, and connect with clients more readily. Still, difficulties in legacy industries cannot be ignored. The housing sector requires steadiness, incomplete construction projects need completion, and local government debt hazards demand oversight. Returning to earlier approaches, however, is neither feasible nor wise. The priority now is tying industrial modernization more directly to everyday needs. Spending on services advanced 5 percent over the first seven months of 2026, signaling changing consumer preferences. Demand now spans healthcare, travel, arts, schooling, eldercare, and online offerings, all of which generate employment and channel growth into household earnings. The link between services, jobs, and spending warrants closer examination. A robust consumer base cannot depend merely on promotional drives. Families open their wallets when they feel assured about employment, wages, housing expenses, and access to medical care and education. Hence, a reinforced social safety net and better public provisions belong in economic strategy, not just welfare policy, since they encourage households to loosen purse strings.
India to push Brics link central bank digital currencies
India is pushing to link central bank digital currencies (CBDCs) across BRICS nations for cross-border payments at a summit later this week, despite political and technical hurdles that could limit progress, two sources familiar with the discussions said. India is chairing BRICS this year, with leaders of the bloc set to meet in New Delhi on September 12 to 13. The Reserve Bank of India (RBI) proposed linking the countries’ official digital currencies to facilitate cross-border trade, Reuters reported in January. The BRICS grouping includes Brazil, Russia, India, China and South Africa, Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates. The proposal to link CBDCs would be a part of the agenda for the leaders’ meeting, the sources said, although the limited adoption of digital currencies globally could complicate implementation. They did not want to be identified due to the sensitivity of the issue and because they are not authorised to speak to media. Emails sent to India’s external affairs and federal finance ministries and the RBI were not answered. India’s proposal will build on the 2025 declaration at the BRICS summit in Rio de Janeiro, which pushed for interoperability between members’ payment systems to make cross-border transactions more efficient.
Any move towards linking CBDCs, however, is likely to face significant challenges. Previous discussions within BRICS on creating shared payment mechanisms have made little headway, underscoring the difficulties of integrating financial infrastructure across a diverse group of countries. Strained relations between countries, such as Iran and the UAE, will remain a sticking point, with the UAE having cut financial ties with Iran, one of the two sources said. India has also been reluctant to deepen financial connectivity with China, the second source said, adding that such arrangements would require deeper trust between the neighbours. India stalled Alipay+’s proposal to link with the country’s instant payments system for cross-border transactions over national security concerns due to its Chinese links, Reuters reported.
Currency-swap arrangements would also be needed to help manage trade imbalances before any CBDC linkage could become operational, the source added. BRICS nations have previously explored alternatives to dollar-based payments, including a proposal by Brazil for a common currency for the group, though the plan never advanced. US President Donald Trump had warned the bloc against such a move by threatening to impose high tariffs.
Indonesia advances green investment strategy
Indonesia has begun implementing an investment strategy centred on green industries as part of efforts to support economic growth and advance the energy transition. This was reported by ANATARA. Dendy Apriandi, Director of Investment Deregulation at the Ministry of Investment and Downstream Industry/BKPM, said the use of green energy is becoming an increasingly important factor in gaining access to international markets. According to Apriandi, Indonesia’s investment policies need to incorporate environmental, social and governance (ESG) considerations. This approach is intended to strengthen the country’s position in the global green economy and support the development of sustainable industries. The government is working to establish an ecosystem for green investment, with priorities including the energy transition, a circular economy, green transport and the adoption of environmentally friendly technologies. These areas are expected to contribute to the development of new investment opportunities and support long-term economic growth. Indonesia is also developing green financing mechanisms aligned with ESG principles, including green financing and carbon pricing. The government is strengthening fiscal and non-fiscal incentives to support green investment while establishing mechanisms for their implementation.
The green economy forms one of five key economic strategies under Indonesia’s 2025–2029 National Medium-Term Development Plan, which targets 8 percent economic growth. Investment is expected to play a central role in accelerating economic expansion and supporting the achievement of this target.
Malaysia, Indonesia eyes further growth
Malaysia and Indonesia have significant scope to expand bilateral trade beyond the RM114 billion recorded last year by strengthening trade facilitation and improving cross-border goods movement.
Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani said improved trade facilitation could substantially increase transaction volume, with the Border Trade Agreement playing an important role in facilitating economic activities.
“What is important is that we can actually double, triple, quadruple transaction volume if the two countries can strengthen trade facilitation,” he said after meeting his Indonesian counterpart Budi Santoso at the 4th Malaysia-Indonesia Joint Trade and Investment Committee (JTIC) meeting recently.
Malaysia’s Ambassador-designate to Indonesia Datuk Muzafar Shah Mustafa was also present at the meeting.
On bilateral trade, Johari said Malaysia exported goods totalling RM51 billion to Indonesia last year and imported RM62.6 billion and was looking to raise exports.
He noted that bilateral trade increased by 10 percent year-on-year (YoY) to RM71.1 billion in the first seven months of 2026 compared with the same period a year ago.
During a joint press statement with Budi following the meeting, Johari said the Border Trade Agreement was among the major areas discussed, alongside Indonesia’s export policies, investment cooperation, standard requirements and halal cooperation. Technical teams from both countries are working on the issues, he said.
“We signed the Border Trade Agreement in 2023. Hopefully, this agreement will facilitate a lot of economic activities between the two countries,” he said.
On Indonesia’s new export policy for strategic natural-resource commodities being channelled via a designated state-owned entity, Johari said Malaysia understands its rationale and will comply.
On investment, Johari said Malaysia and Indonesia should further strengthen collaboration, noting that cumulative Malaysian investments in Indonesia between 2023 and 2025 totalled about RM70 billion, equivalent to some US$17 billion.
Both countries will benefit more from collaboration, with their respective leaderships working together, he said.
Budi said Indonesia expects bilateral trade to continue rising alongside stronger investment flows.
“We expect trade between both countries to continue to rise. Malaysia exports to Indonesia to increase and Indonesia’s exports to Malaysia’s also expand,” he said.
Malaysia and Indonesia’s close relationship as fellow ASEAN members and strong cultural affinity can strengthen mutual trust, thus supporting bilateral trade and investment growth, he said.
Sri Lanka cannot build reserves at any cost
Sri Lanka cannot accumulate foreign exchange reserves through market distortions, money printing, or heavy foreign borrowing, but must build buffers before external shocks strike, Central Bank Governor Nandalal Weerasinghe said.
“For central banks, foreign reserves are far more than financial assets on a balance sheet. They are a country’s—a nation’s—first line of defense against external shocks,” Weerasinghe told a Reserve Management Conference in Colombo.
Foreign exchange reserves are a nation’s savings that provide vital time and policy space during a crisis, preventing disorderly economic corrections, Weerasinghe said.
Sri Lanka experienced this during its 2022 economic crisis when depleted buffers crippled imports, accelerated inflation, and triggered debt defaults, he said.
While external balances have improved since 2023, rebuilding reserves is not linear because sudden shocks can quickly wipe them out.
Weerasinghe warned that rebuilding buffers requires discipline and cannot happen at any cost. Excessive market interventions distort price signals, monetary financing fuels inflation, and commercial debt creates future repayment burdens.
“A sustainable reserve accumulation strategy is not merely about acquiring reserves; it is about building an economy that naturally generates and retains foreign exchange,” he said.
Weerasinghe said reserve adequacy must move beyond simple months of import cover to assess debt servicing, volatile capital flows, and climate shocks.
He cautioned that portfolio diversification must not compromise liquidity, while citing bilateral support from the Reserve Bank of India during the crisis as vital regional resilience.
Asian Infrastructure Investment Bank (AIIB) Treasurer Domenico Nardelli, who attended as the chief guest and delivered the keynote address, noted that reserve managers face sharp price swings even in safe assets like US Treasuries.