Asia's Economic Growth Threatened by Inflation Risks and Geopolitical Tensions

Asia's economic landscape is facing multiple challenges as it grapples with supply-side inflation risks and the impact of the ongoing US-Iran conflict. The recent escalation of tensions between the two nations has pushed crude oil prices higher, keeping geopolitical risk elevated.

The AI export boom continues to power regional growth, but this trend may be disrupted by El Niño, which is already affecting parts of Southeast Asia and redistributing rainfall elsewhere. This could lead to crop disruptions and increased food prices, adding to policymaker woes.

In Japan, government bond yields have surged alongside global peers, driven by fiscal concerns and the prospect of heavier spending in the upcoming budget. The 10-year yield is now flirting with 3%, a level not seen since the 1990s.