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from Breakingviews:

Asia’s pain unevenly spread as China slows

By John Foley

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Asia’s falling markets reflect the belief that a slowdown in China will take its toll on the region. But things aren’t so straightforward. Look at what proportion of the region’s largest economies goes to China, and how important those exports are to domestic GDP. Despite a decade of rapid growth, the world’s second-largest economy has had a smaller impact on its neighbours than might be expected.

Graphic: Exports to China as share of GDP  

Consider Australia. A third of its exports go to China, according to calculations based on data from the International Monetary Fund. That’s mostly mined commodities like iron and coal. Yet the total value of those exports was equivalent to just five percent of Australia’s GDP in 2012. Japan is similarly insulated – over a fifth of its exports are China-bound, but those equate to just three percent of total output.

Vietnam is deeper into China’s slipstream. Some 17 percent of exports go to China, reflecting its growing role as a low-cost link in the global manufacturing supply chain. That is equivalent to 13 percent of GDP. South Korea, home to Samsung and Hyundai, exports goods equivalent to 15 percent of GDP to the Middle Kingdom, double the level a decade ago. For Singapore – perhaps unsurprisingly, given its trading roots – exports to China have risen to 32 percent of GDP.

from MacroScope:

G8 — plenty to worry about

The week kicks off with a G8 leaders’ summit in Northern Ireland. Syria will dominate the gathering and the British agenda on tax avoidance is likely to be long on rhetoric, short on binding specifics.

But for the economics file, this meeting could still yield big news. For a start, Japanese prime minister Abe is there – the man who has launched one of the most aggressive stimulus drives in history yet has already seen the yen climb back to the level it held before he started.

from MacroScope:

A week to reckon with

The week kicks off with a G8 leaders’ summit in Northern Ireland. Syria will dominate the gathering and the British agenda on tax avoidance is likely to be long on rhetoric, short on specifics. But for the markets, this meeting could still yield some big news. For a start, Japanese prime minister Abe is there – the man who has launched one of the most aggressive stimulus drives in history yet has already seen the yen climb back to the level it held before he started. Abe will also speak in London and Warsaw during the week.

The financial backdrop could hardly be more volatile with emerging markets selling off dramatically since the Federal Reserve warned the pace of its dollar creation could be slowed. Berlin has said the G8 leaders are likely to discuss the role of central banks and monetary policy, and Angela Merkel will hold bilateral talks with Abe during the summit. President Barack Obama travels to Berlin after the summit for talks with Merkel.

from Breakingviews:

Market jitters could crush Japan’s inflation drive

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Skittish markets are a threat to Japan’s anti-deflation drive. The rising yen, falling stocks and lower government bond yields suggest investors once again view Japan as a safe haven. The Bank of Japan may need to be bolder to prevent their expectations from becoming self-fulfilling.

from Breakingviews:

Deflation flu could leave Asia feeling very sick

By Andy Mukherjee

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Deflation is entering Asia through the back door. Producer prices are sliding across the region - falling 8.5 percent even in the Philippines, where GDP grew 7.8 percent in the first quarter. Cheaper commodities are partly to blame, but the main culprit is sluggish demand from the United States. If companies can’t make up the difference, they may struggle to repay growing debts.

from Global Investing:

When Japan was an emerging country

Recent wild swings in Japan's financial markets -- stocks, bonds and the yen -- make Japan look almost like an emerging country.

Back in the 19th century, Japan was an emerging country, with its feudal society based largely on farming.

from Breakingviews:

SoftBank’s bump for Sprint isn’t a knock-out

By Peter Thal Larsen

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

SoftBank’s raised bid for Sprint Nextel is no knock-out blow. The Japanese group has tweaked its offer for a controlling stake in the U.S. telco to give the target’s shareholders more value. But Sprint shareholders would retain a stake in a Sprint that has more debt than first envisaged. That erodes SoftBank’s key advantage as it seeks to combat a rival bid from leveraged counterbidder Dish Network.

from Breakingviews:

Bond jitters shouldn’t delay Japan pension reform

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By reforming Japan’s public pension system, Prime Minister Shinzo Abe is taking a calculated risk. Asking state funds to buy fewer government bonds may look like an own goal at a time when the central bank is struggling to control yields. But the payoff to both the government and Japan’s fast-ageing society could be worth it.

from Breakingviews:

Japan e-book: Abe’s Economic Experiment

By Peter Thal Larsen

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Japan’s prime minister has electrified investors with his three-pronged strategy to shock the country out of its economic malaise. Abenomics has profound implications not just for Japan, but for the rest of the world too. Our new book examines the economic phenomenon of the year.

from Breakingviews:

Japan bond market blues: A guide for the perplexed

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

The Bank of Japan’s money-printing plan is failing to keep borrowing costs in check. Since the central bank pledged on April 4 to double its holdings of Japanese government bonds in two years, the yield on 10-year government debt has doubled. On May 23, it briefly touched 1 percent.

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