- Big new fiscal plan anticipated - relies on economy growing solidly (i.e. Abenomics working).
- The plan envisages only modest spending cuts but limited tax increases.
- So as to avoid a ballooning budget deficit, the plan relies on robust growth to ensure tax revenue stays high.
- Seems that inflation expectations up.
- Oil price appears to have troughed.
- Lower energy prices were main factor bringing US inflation < 0% earlier this year.
- Obama administration hoping to soon seal massive Pacific trade pact (TPP) - geopolitically significant to counter China's growing regional influence.
- But majority of Democrats against it (trade pacts tend to threaten US manufacturing jobs).
- So Obama relying on Republicans (who are supportive) to get TPP through Congress (Republicans hold majorities in both houses).
- Disappointing start to year - growth & inflation will be lower than expected.
- But government insists stimulation package (Abenomics) on track.
- Early signs that deflationary mindset is subsiding.
- Recession for most countries in region as commodity boom over (due to slower China growth).
- But Chile recovering faster than anyone, and most macroeconomic indicators improving.
- Regarded as best-run regional economy due to strong institutions, free-trade ethos & minimal state intervention.
- Rapidly strengthening economic & military ties as US influence wanes & China becomes Pakistan's biggest ally.
- China's President Xi pledges $45bn of infrastructure investments.
- China sees Pakistan and neighbours as a market for its exports, so is trading investment and aid for access.
- To build vast network of railways, roads, ports and pipelines across Asia, financed by the new institutions it leads.
- Industrial overcapacity at home.
- Therefore aim is to create demand for China's industrial exports across the region.