Economy

Macroeconomic conditions remain supportive of continued monetary policy normalisation 

by IFAST RESEARCH TEAM 

THE Bank of Japan’s (BOJ) rate hike cycle is underpinned by a reflating environment. Japan’s core Consumer Price Index (CPI), the BOJ’s preferred measure of inflation, has remained above the 2% target since April 2022. 

Domestic consumption has provided some support to inflation, as reflected by core CPI remaining above 2% since September 2024. 

However, the recovery remains modest, with real consumption still lagging significantly behind nominal spending. 

Addressing cost pressures while lifting real consumption remains a key policy priority for Prime Minister (PM) Sanae Takaichi. The recently approved ¥21.3 trillion (RM552 billion) stimulus package, including cash handouts, rice vouchers and electricity bill subsidies, is well-positioned to support higher household spending. 

Another key indicator that Japan is moving toward sustainable inflation is improving wage dynamics. While real cash earnings remain in negative territory, the pace of decline has narrowed in the first half of 2025 (1H25). 

More importantly, wage growth is expected to persist, as Rengo, Japan’s largest labour union, is once again pushing for wage increases of 5% or more in 2026. 

With ongoing wage growth, alongside consumption-supportive subsidies and government efforts to curb food inflation, Japan is likely to see positive real wage growth and stronger wage-driven consumption in 2026. 

Japan’s economic growth has also been holding up well. In its latest quarterly Outlook for Economic Activity and Prices, the BOJ upwardly revised real GDP growth for 2025 from 0.6% to 0.7%, driven by stronger business investment and a rebound in exports. 

Looking ahead, the BOJ projects modest 0.7% year-on-year (YoY) GDP growth for 2026, reflecting caution amid slowing global demand. 

However, reduced US tariff rates to 15% under recent trade deals and renewed stimulus measures Takaichi, aimed at supporting household consumption, could help mitigate downside risks to growth. 

Japan’s macroeconomic environment points to a continued refla- tionary trend, supporting further monetary tightening. That said, the pace of rate hikes is likely to remain measured in 2026, as both real consumption and real wage growth still have room to improve. 

Corporate Reforms are Fuelling Japanese Equities’ Appeal

Corporate reforms have been a key contributor to equity market growth. Since the Tokyo Stock Exchange (TSE) introduced measures to address low price-to-book (P/B) ratios in March 2023, companies have accelerated efforts to improve capital efficiency, earnings and shareholder returns. 

As of Dec 22, 2025, the share of Nikkei 225 companies with P/B above one has risen from 45% in 2022 to 75%, with a weighted average P/B of 2.2 times. 

Return on equity (ROE), a key measure of how efficiently companies generate profit from investments, has also improved to 10.8% as of Dec 22, 2025, up from a pre-2023 average of 8.9%. 

While progress is evident, Japanese companies still lag other developed markets, with the S&P 500 and STOXX Europe 600 posting higher ROEs of 18.8% and 12.2% respectively. 

Government initiatives continue to fuel reform and long-term improvements. In 2025, the Financial Services Agency revised the Stewardship Code to promote greater shareholder engagement through enhanced investor- company dialogue. 

The TSE also tightened listing criteria for the “Growth Market,” requiring companies listed for five or more years to meet a ¥10 billion market capitalisation threshold by March 1, 2030. Firms failing to meet the target must present growth strategies to the TSE or face potential delisting. 

Delistings are already on the rise, reflecting TSE’s focus on listing quality over quantity. In 2025, 124 companies were delisted, up from 94 in 2024. 

Rising costs of public listing and activist shareholder pressure are also driving management-led takeovers, particularly among smaller-cap companies that are often overlooked by global funds. 

With TSE’s transitional relief now ended, 2026 is expected to see further delistings. Importantly, this should be viewed as a positive rather than a concern. 

As weaker or less committed list- ings exit the market, the reforms incentivise the remaining companies to improve earnings quality, enhance liquidity and raise their visibility in order to meet stricter listing standards. This, in turn, encourages better capital allocation and more shareholder-friendly behaviour. 

Stimulus, Reflation to Drive Robust Earnings Growth

Japanese companies delivered a strong rebound in the second quarter of 2026 (2Q26), as tariff- related price distortions and export concerns eased. 

All sectors except energy and real estate posted positive earnings surprises. The top ten Nikkei 225 holdings collectively achieved an impressive 72% YoY earnings growth, with Advantest Corp and SoftBank Group Corp benefiting most from artificial intelligence (AI) investments and the rapid expansion of high-performance computing. 

Looking ahead, sectors such as communication services and information technology are set to gain from Takaichi’s technological nationalism agenda. 

Japan’s efforts to revive domestic semiconductor manufacturing, including its ambition to produce two newton metre (Nm) chips, are expected to continue supporting Rapidus Corp, including SoftBank and Nippon Telegraph and Telephone Corp and other players in the semiconductor supply chain such as Tokyo Electron Ltd and Advantest. 

Government initiatives to build a domestic cloud ecosystem and data management platforms should also benefit cloud service providers, telecoms and cybersecurity software firms. 

Strong wage growth, combined with new stimulus packages should contain price pressures and boost consumption. 

Consumer staples are likely to be major beneficiaries, with brands such as Sapporo Holdings Ltd and Japan Tobacco Inc recently upgrading full-year earnings forecasts on stronger domestic sales. 

Consumer discretionary, by contrast, may see more modest growth, as automakers, still heavily reliant on the US market, absorb higher costs to maintain market share, which squeezes profit margins. 

The ongoing rate-hiking environment is also expected to support the financial sector, allowing banks to capture wider interest margins. 

Japan’s largest banks are already raising annual profit forecasts and expanding share buyback programmes after strong Q2 results. 

Japan’s three largest banks have all upgraded their financial year 

2026 (FY26) earnings guidance. Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc have raised their earnings targets by around 5% and 15%, respectively, while Mizuho Financial Group Inc has upgraded its earnings forecast twice during the current financial year, resulting in a target that is now approx- imately 11% higher than its initial projection. 

Yen is Expected to Find Modest Support in 2026

The Japanese yen continued to weaken despite a 25 basis points (bps) rate hike in December last year, as yen/US dollar movements diverged from narrowing rate differentials. 

The pressure likely stemmed from a widely expected rate hike size, BOJ governor Kazuo Ueda’s cautious post-meeting commentary and fiscal concerns tied to large budget outlays under the new PM. 

Looking ahead to 2026, the yen is expected to find modest support. Persistent inflation and further BOJ tightening, coupled with stimulus measures boosting consumption, could strengthen the currency. 

A potential US rate cut would also narrow the interest rate spread, benefiting the yen. Finance Minister Satsuki Katayama has noted Japan has sufficient capacity to intervene in the currency market if excessive weakening occurs. Overall, yen is likely to maintain a slight upward bias in 2026. 

Japan’s Appealing Valuations Boosts Its Investment Case

While Japan-China tensions are unlikely to be resolved soon, Japan is expected to mitigate economic losses from tourism through stimulus measures and ensure supply chain stability via its “China+1” strategy. 

In the near term, volatility and price pressure may persist, but tensions are likely to be contained, as both countries have limited incentives to escalate further. 

• The views expressed are of the research team and do not necessarily reflect the stand of the newspaper’s owners and editorial board. 

• This article first appeared in The Malaysian Reserve weekly print edition

The post Structural reform steadies Japan appeared first on The Malaysian Reserve.

Macroeconomic conditions remain supportive of continued monetary policy normalisation 

by IFAST RESEARCH TEAM 

THE Bank of Japan’s (BOJ) rate hike cycle is underpinned by a reflating environment. Japan’s core Consumer Price Index (CPI), the BOJ’s preferred measure of inflation, has remained above the 2% target since April 2022. 

Domestic consumption has provided some support to inflation, as reflected by core CPI remaining above 2% since September 2024. 

However, the recovery remains modest, with real consumption still lagging significantly behind nominal spending. 

Addressing cost pressures while lifting real consumption remains a key policy priority for Prime Minister (PM) Sanae Takaichi. The recently approved ¥21.3 trillion (RM552 billion) stimulus package, including cash handouts, rice vouchers and electricity bill subsidies, is well-positioned to support higher household spending. 

Another key indicator that Japan is moving toward sustainable inflation is improving wage dynamics. While real cash earnings remain in negative territory, the pace of decline has narrowed in the first half of 2025 (1H25). 

More importantly, wage growth is expected to persist, as Rengo, Japan’s largest labour union, is once again pushing for wage increases of 5% or more in 2026. 

With ongoing wage growth, alongside consumption-supportive subsidies and government efforts to curb food inflation, Japan is likely to see positive real wage growth and stronger wage-driven consumption in 2026. 

Japan’s economic growth has also been holding up well. In its latest quarterly Outlook for Economic Activity and Prices, the BOJ upwardly revised real GDP growth for 2025 from 0.6% to 0.7%, driven by stronger business investment and a rebound in exports. 

Looking ahead, the BOJ projects modest 0.7% year-on-year (YoY) GDP growth for 2026, reflecting caution amid slowing global demand. 

However, reduced US tariff rates to 15% under recent trade deals and renewed stimulus measures Takaichi, aimed at supporting household consumption, could help mitigate downside risks to growth. 

Japan’s macroeconomic environment points to a continued refla- tionary trend, supporting further monetary tightening. That said, the pace of rate hikes is likely to remain measured in 2026, as both real consumption and real wage growth still have room to improve. 

Corporate Reforms are Fuelling Japanese Equities’ Appeal

Corporate reforms have been a key contributor to equity market growth. Since the Tokyo Stock Exchange (TSE) introduced measures to address low price-to-book (P/B) ratios in March 2023, companies have accelerated efforts to improve capital efficiency, earnings and shareholder returns. 

As of Dec 22, 2025, the share of Nikkei 225 companies with P/B above one has risen from 45% in 2022 to 75%, with a weighted average P/B of 2.2 times. 

Return on equity (ROE), a key measure of how efficiently companies generate profit from investments, has also improved to 10.8% as of Dec 22, 2025, up from a pre-2023 average of 8.9%. 

While progress is evident, Japanese companies still lag other developed markets, with the S&P 500 and STOXX Europe 600 posting higher ROEs of 18.8% and 12.2% respectively. 

Government initiatives continue to fuel reform and long-term improvements. In 2025, the Financial Services Agency revised the Stewardship Code to promote greater shareholder engagement through enhanced investor- company dialogue. 

The TSE also tightened listing criteria for the “Growth Market,” requiring companies listed for five or more years to meet a ¥10 billion market capitalisation threshold by March 1, 2030. Firms failing to meet the target must present growth strategies to the TSE or face potential delisting. 

Delistings are already on the rise, reflecting TSE’s focus on listing quality over quantity. In 2025, 124 companies were delisted, up from 94 in 2024. 

Rising costs of public listing and activist shareholder pressure are also driving management-led takeovers, particularly among smaller-cap companies that are often overlooked by global funds. 

With TSE’s transitional relief now ended, 2026 is expected to see further delistings. Importantly, this should be viewed as a positive rather than a concern. 

As weaker or less committed list- ings exit the market, the reforms incentivise the remaining companies to improve earnings quality, enhance liquidity and raise their visibility in order to meet stricter listing standards. This, in turn, encourages better capital allocation and more shareholder-friendly behaviour. 

Stimulus, Reflation to Drive Robust Earnings Growth

Japanese companies delivered a strong rebound in the second quarter of 2026 (2Q26), as tariff- related price distortions and export concerns eased. 

All sectors except energy and real estate posted positive earnings surprises. The top ten Nikkei 225 holdings collectively achieved an impressive 72% YoY earnings growth, with Advantest Corp and SoftBank Group Corp benefiting most from artificial intelligence (AI) investments and the rapid expansion of high-performance computing. 

Looking ahead, sectors such as communication services and information technology are set to gain from Takaichi’s technological nationalism agenda. 

Japan’s efforts to revive domestic semiconductor manufacturing, including its ambition to produce two newton metre (Nm) chips, are expected to continue supporting Rapidus Corp, including SoftBank and Nippon Telegraph and Telephone Corp and other players in the semiconductor supply chain such as Tokyo Electron Ltd and Advantest. 

Government initiatives to build a domestic cloud ecosystem and data management platforms should also benefit cloud service providers, telecoms and cybersecurity software firms. 

Strong wage growth, combined with new stimulus packages should contain price pressures and boost consumption. 

Consumer staples are likely to be major beneficiaries, with brands such as Sapporo Holdings Ltd and Japan Tobacco Inc recently upgrading full-year earnings forecasts on stronger domestic sales. 

Consumer discretionary, by contrast, may see more modest growth, as automakers, still heavily reliant on the US market, absorb higher costs to maintain market share, which squeezes profit margins. 

The ongoing rate-hiking environment is also expected to support the financial sector, allowing banks to capture wider interest margins. 

Japan’s largest banks are already raising annual profit forecasts and expanding share buyback programmes after strong Q2 results. 

Japan’s three largest banks have all upgraded their financial year 

2026 (FY26) earnings guidance. Mitsubishi UFJ Financial Group Inc and Sumitomo Mitsui Financial Group Inc have raised their earnings targets by around 5% and 15%, respectively, while Mizuho Financial Group Inc has upgraded its earnings forecast twice during the current financial year, resulting in a target that is now approx- imately 11% higher than its initial projection. 

Yen is Expected to Find Modest Support in 2026

The Japanese yen continued to weaken despite a 25 basis points (bps) rate hike in December last year, as yen/US dollar movements diverged from narrowing rate differentials. 

The pressure likely stemmed from a widely expected rate hike size, BOJ governor Kazuo Ueda’s cautious post-meeting commentary and fiscal concerns tied to large budget outlays under the new PM. 

Looking ahead to 2026, the yen is expected to find modest support. Persistent inflation and further BOJ tightening, coupled with stimulus measures boosting consumption, could strengthen the currency. 

A potential US rate cut would also narrow the interest rate spread, benefiting the yen. Finance Minister Satsuki Katayama has noted Japan has sufficient capacity to intervene in the currency market if excessive weakening occurs. Overall, yen is likely to maintain a slight upward bias in 2026. 

Japan’s Appealing Valuations Boosts Its Investment Case

While Japan-China tensions are unlikely to be resolved soon, Japan is expected to mitigate economic losses from tourism through stimulus measures and ensure supply chain stability via its “China+1” strategy. 

In the near term, volatility and price pressure may persist, but tensions are likely to be contained, as both countries have limited incentives to escalate further. 

• The views expressed are of the research team and do not necessarily reflect the stand of the newspaper’s owners and editorial board. 

• This article first appeared in The Malaysian Reserve weekly print edition

The post Structural reform steadies Japan appeared first on The Malaysian Reserve.

MALAYSIA is set to keep its benchmark interest rate unchanged on Thursday, as better-than-expected economic growth coupled with low inflation provide a buffer for policymakers to stand pat.

Bank Negara Malaysia is expected to keep the Overnight Policy Rate at 2.75% at its first monetary policy committee meeting for the year, according to all 22 economists in a Bloomberg survey. The central bank has adjusted borrowing costs just once in the past two years, with a 25-basis point cut in July 2025.

BNM has reason to remain steady. The Southeast Asian nation has proved resilient amid global headwinds, with economic growth accelerating in the second half of the year on robust domestic demand. Fears that US President Donald Trump’s tariffs would prompt an export slowdown in late 2025 didn’t materialize, with the value of outbound shipments last year reaching a record high. At the same time, inflation remained benign, easing to a five-year-low of 1.4% in 2025.

The country’s fortunes contrast with the travails of neighboring Indonesia, which held rates unchanged on Wednesday after weak investor sentiment sent the rupiah to a record low.

Here’s what to watch on Thursday at 3 p.m. local time:

External Risks

Malaysia is bracing for softer growth this year on expectations that global volatility will weigh on the trade-reliant nation. Renewed tariff threats from the US on various countries and growing geopolitical risks may lead to a bumpy ride for Malaysia’s trade this year, United Overseas Bank economists Julia Goh and Loke Siew Ting wrote in a note Tuesday.

Malaysia expects trade to increase at a slower pace of 3.3% this year, from 6.3% in 2025, amid the fading impact of tariff-related front-loading and the possibility of fresh levies. A firmer ringgit could also put downward pressure on export-oriented industries. The ringgit emerged as the strongest currency in Asia last year.

Growth Drivers

Policymakers are counting on domestic demand to shield the economy from external headwinds, with private consumption set to be buoyed by the lowest jobless rate in more than a decade as well as plans to welcome a record number of tourists this year.

Investment momentum should also remain intact in Malaysia, supported by ongoing infrastructure projects and continued data center expansion amid the global tech upcycle, To Zheng Hong, an analyst at Apex Securities, wrote in a note on Wednesday.

The government expects the economy to expand 4%-4.5% in 2026, slower than the 4.9% growth seen last year.

Stable Inflation

State efforts to address higher living costs through price controls and petrol subsidies are having an impact. Malaysia’s inflation stayed moderate last year, averaging below the central bank’s 1.5%-2.3% forecast.

For 2026, inflation is expected to remain below its long-term historical average, reinforcing the view of a relatively benign price environment, Farid Burhanuddin, an analyst at TA Securities Holdings, said in a note Wednesday.

Demand-driven inflation is expected to be the main contributer this year, underpinned by government cash handouts, a firm labor market and rising household incomes — all of which will likely be manageable and transitory, he said. –BLOOMBERG

The post Malaysia set to hold rate as growth stays strong, inflation low appeared first on The Malaysian Reserve.

by AKMAR ANNUAR

MALAYSIA has defended its decision to proceed with the Agreement on Reciprocal Trade (ART) with the US, arguing that the pact is necessary to preserve market access and protect export competitiveness, even as several Southeast Asian countries have yet to sign or ratify similar arrangements.

Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani said the government’s decision to enter into ART was made after careful consideration of national economic interests, stressing that the agreement has not yet come into force as the ratification process is still ongoing.

“At present, the ratification process is still underway and has not been completed, which means the ART between Malaysia and the US has yet to take effect,” Johari said in Parliament today.

He added that Malaysia, as an open economy, must act in line with its national trade and investment needs.

He said Malaysia’s participation in ART is aimed at ensuring continued and stable access to the US market, which remains one of the country’s key trading partners and investment destinations.

Malaysia’s exports to the US, he noted, stood at RM167.2 billion in 2022, RM161.3 billion in 2023 and rose to RM198.6 billion in 2024.

Johari said the agreement also serves as a safeguard against the risk of higher reciprocal tariffs being imposed on Malaysian exports to the US, which could undermine the competitiveness of local products, weaken Malaysia’s position in global supply chains and affect long-term employment prospects.

In comparing Malaysia’s position with regional peers, he said the US has imposed steeper tariffs on countries that have not entered into similar arrangements, citing Myanmar and Laos at 40% and Brunei at 25%.

Countries still in negotiations, including Vietnam, Cambodia, Indonesia, the Philippines and Thailand, face tariff levels broadly comparable to Malaysia’s, while Singapore is subject to a lower rate of 10% due to its trade deficit with the US.

Beyond tariffs, Johari said the ART provides policy certainty and predictability for businesses and investors, an important factor in attracting and retaining high-quality investments, particularly in strategic sectors such as electrical and electronics (E&E).

Exports of E&E products to the US, he said, increased from RM96.0 billion in 2022 to RM120.1 billion in 2024.

“The agreement provides assurance and predictability to the business and investor community, which is crucial for sustaining quality investments, especially in strategic sectors such as electrical and electronics,” he said.

Addressing broader concerns raised over sovereignty and national interests, Johari reiterated that ART does not amount to blanket acceptance of all US demands, and said negotiations are structured to keep channels for dialogue and resolution open without compromising Malaysia’s policy space.

He said the government remains mindful of sensitivities surrounding issues such as halal certification, constitutional provisions and domestic industry protection, maintaining that the agreement does not override Malaysia’s legal framework or sovereign decision-making powers.

The post Malaysia defends reciprocal trade pact with US despite regional hesitation appeared first on The Malaysian Reserve.

KUALA LUMPUR — Bank Negara Malaysia (BNM) is expected to maintain the overnight policy rate (OPR) at 2.75 per cent throughout 2026, supported by subdued inflation in 2025 and steady economic growth.

Citing the latest Consumer Price Index (CPI) data released by the Department of Statistics Malaysia (DoSM) yesterday, Hong Leong Investment Bank Bhd (HLIB) said full-year inflation for 2025 settled at 1.4 per cent, down from 1.8 per cent in 2024, signalling that the post-pandemic disinflationary trend remains intact.

Moving into 2026, HLIB anticipated the CPI, a key gauge of inflation in Malaysia, would trend slightly higher to 1.7 per cent, driven by the low base effect, domestic policy adjustments, and communication-related inflation.

“Nevertheless, the upward trajectory is anticipated to be mild due to lower RON95 prices, a benign global commodity environment, coupled with a strong ringgit,” it said in a note today.

According to DoSM data, headline inflation picked up 1.6 per cent year-on-year (y-o-y) in December 2025, from 1.4 per cent in November 2025, exceeding the median consensus estimate of 1.4 per cent.

“Inflation was driven by higher inflation in alcoholic beverages and tobacco, housing, utilities and other fuels, information and communication, as well as personal care,” it said.

Meanwhile, core inflation ticked up to 2.3 per cent y-o-y in December 2025, from 2.2 per cent in the previous month, it added. — BERNAMA

The post HLIB: Subdued inflation likely to keep BNM’s OPR at 2.75% in 2026 appeared first on The Malaysian Reserve.

By TMR 

MALAYSIA’S total trade surpassed the RM3 trillion mark for the first time in history last year, signalling the country’s growing resilience and competitiveness amid geopolitical uncertainty and global supply chain restructuring.

According to official figures released by the Department of Statistics Malaysia (DOSM), Malaysia’s total trade reached RM3.061 trillion, up 6.3% year-on-year from 2024.

The milestone reflects sustained export expansion, strong demand for industrial imports and a widening trade surplus, reinforcing Malaysia’s position in high-value and technology-driven global supply chains.

Exports climbed to a new record of RM1.607 trillion, rising 6.5% and surpassing the previous peak of RM1.55 trillion in 2022. 

This marked the fifth consecutive year that exports exceeded RM1 trillion.

Export growth was driven by higher shipments to key markets, including ASEAN (up 4.5% to RM457.62 billion), the US (up 17.2% to RM233.08 billion), Taiwan (up 31.2% to RM87.95 billion) and the European Union (up 11.5% to RM129.17 billion), reflecting Malaysia’s critical role in advanced manufacturing and electronics supply chains.

Imports rose 6.2% to RM1.455 trillion, marking the fourth consecutive year above RM1 trillion. 

Intermediate and capital goods accounted for more than 64% of total imports, supporting export-oriented industries, particularly in technology-intensive sectors.

Malaysia’s trade surplus widened to RM151.8 billion, a 9.2% increase from 2024, extending the country’s uninterrupted trade surplus streak to 28 consecutive years since 1998.

Trade with free trade agreement (FTA) partners exceeded RM2 trillion for the first time, accounting for 65.5% of total trade. 

Exports to FTA partners rose 3% to RM1.067 trillion, with strong growth recorded in Hong Kong, Mexico, Canada and Chile.

Malaysia’s export diversification strategy has also boosted shipments to fast-growing emerging markets such as Kenya, Nigeria, Tanzania, Togo, Yemen, Algeria, Uzbekistan, Angola and Kyrgyzstan, with several markets posting record export values.

Key export products continued to be led by palm oil and palm-based products, petroleum products, wood products and electrical and electronics (E&E) goods.

Malaysia External Trade Development Corporation (Matrade) chairman Datuk Seri Reezal Merican Naina Merican attributed the strong trade performance to strategic economic diplomacy and policy support under the Madani government.

“Growth in 2025, particularly in emerging markets and among FTA partners, was reinforced by high-level official visits by the Prime Minister to regions such as Africa, Latin America and Central Asia, which opened pathways for deeper economic relations and expanded market access,” he said in a statement.

He said policy backing under the 12th Malaysia Plan (12MP) and the New Industrial Master Plan 2030 (NIMP 2030) has strengthened Malaysia’s position in high-value, technology-driven global supply chains.

Reezal Merican also acknowledged newly appointed Investment, Trade and Industry Minister Datuk Seri Johari Abdul Ghani for leading successful trade missions that expanded Malaysia’s key commodity exports, particularly palm oil.

Palm oil and palm-based exports accounting for 7.8% of total exports, rose 9.2% to RM124.86 billion, supported by higher export prices and expanded access to markets such as India, China, Türkiye, Afghanistan and several African economies.

Matrade CEO Abu Bakar Yusof said the agency will continue to prioritise export promotion and SME participation amid rising global protectionism and supply chain realignment.

“Matrade remains committed to empowering local exporters, particularly SMEs, to penetrate new markets and navigate evolving global trade challenges,” he said.

The post Malaysia breaks RM3 trillion trade mark for first time in 2025 appeared first on The Malaysian Reserve.

KUALA LUMPUR — The implementation of the Public Service Remuneration System (SSPA) is a strategic government move to address the issue of the disposable income gap among civil servants amid the rising cost of living.

Public Service Department (JPA) Salary and Allowances Division director Hasmarulaini Omar said the shift from the Malaysian Remuneration System (SSM) to the SSPA was critical, given that the last comprehensive salary adjustment was carried out in 2012.

She explained that over the 22 years since the implementation of the SSM in 2002, the employment landscape, technology and economic demands had changed drastically, thus necessitating a more holistic and sustainable review of the remuneration system.

“The main challenge identified is the imbalance between civil servants’ disposable income and inflation. In addition, the government must also consider national fiscal sustainability in managing emolument expenditure and retirement benefits,” she said on Bernama’s Ruang Bicara programme recently.

Elaborating on the uniqueness of the SSPA, which was now entering Phase 2, Hasmarulaini said the system was not merely focused on salary increases, but was instead grounded in the philosophy of total rewards.

She said the SSPA was introduced with four main objectives, namely to recognise high-performing civil servants, enhance the efficiency of service delivery to the people, optimise human resources, and improve the overall quality of the public service.

“We are not only looking at the financial aspect. Phase 2 of the SSPA places specific emphasis on talent development, digital competencies and clearer career pathways. This is important to ensure the public service remains relevant to future needs that are technology-driven,” she explained.

Touching on talent competition with the private sector, Hasmarulaini acknowledged that the government might not be able to compete fully in terms of cash salary value, but the public service offered a broader welfare package.

“Our package is comprehensive. In addition to salary and fixed emoluments, civil servants enjoy various other benefits such as medical facilities, leave, and a sustainable working environment. The principle of ‘rate for the job’ continues to be practised to ensure that remuneration is commensurate with workload and academic qualifications,” she said.

The SSPA, which came into effect on Dec 1, 2024, is a major government initiative to replace the SSM. It was introduced as a reform in the public service to boost staff motivation through a more competitive salary structure as well as a fairer and more transparent performance evaluation. — BERNAMA

The post JPA: SSPA addresses disposable income gap amid rising cost of living appeared first on The Malaysian Reserve.

FOLLOWING a record-breaking performance in 2025 where total trade hit the RM3.1 trillion mark, Malaysia’s external trade outlook for 2026 is expected to face a period of moderation.

Economists at MBSB Research have revised their forecasts downward, citing a more challenging global landscape.

The research house now anticipates export growth to cool to 4.5%, down from a previous forecast of 6.0%, and import growth to settle at 5.0% from 5.5% previously.

The revision comes as several tailwinds that bolstered 2025 performance such as “front-loading” by companies to avoid impending trade barriers begin to fade.

“For 2026, we still anticipate moderation in external trade but adjusting our forecasts for export to +4.5% (previously +6.0%; 2025: +6.5%) and for imports to +5.0% (previously +5.5%; 2025: +6.2%),” the report stated.

It noted that the downward revision specifically reflects “fading front-loading effects, high base and the impact of US tariff measures on final demand.”

A primary concern for the 2026 outlook is the recently announced 25% tariff on specific semiconductor products by the US.

Given that semiconductors represent approximately 66% of Malaysia’s electrical and electronic (E&E) exports, the impact could be significant.

“The E&E sector faces additional pressure from the recently announced 25% tariff on certain semiconductor products, which could dampen Malaysia’s broader economy and technology industry,” MBSB Research warned.

However, the report also highlighted potential cushions, including the Agreement on Reciprocal Trade (ART) with the US, which is expected to “enhance market access in 2026 because of reduced uncertainties.”

The cautious outlook for the coming year stands in contrast to the milestone achieved in 2025.

Malaysia’s total trade reached an all-time high of RM3.1 trillion, supported by a 6.5% growth in exports.

This performance was particularly strong in the final quarter, with December 2025 marking four consecutive months of double-digit growth (+11.1% yoy).

The trade surplus for 2025 also widened to RM151.8 billion, up from RM139.1 billion in 2024, largely driven by the surge in E&E products, with exports rising 25.3% yoy in December alone, a massive 24.9% increase in re-exports for the full year, and strong shipments to Mexico, the Netherlands, and the Czech Republic, reflecting Malaysia’s ongoing market diversification strategy.

Looking forward, the government’s strategy to broaden export markets is seen as a vital defense against external volatility.

“The government pursuit to broaden and diversify export markets and strengthened bilateral ties should help mitigate external headwinds and heightened geopolitical uncertainties,” the report concluded. — TMR

The post Tough 2026 ahead for Malaysia’s external trade appeared first on The Malaysian Reserve.

by AKMAR ANNUAR

THE government is ramping up incentives and technology support for small farmers and young agro-entrepreneursation of Malaysia’s agri-food sector and bolster national food security.

Agriculture and Food Security Deputy Minister Datuk Chan Foong Hin (picture) said the ministry is pursuing a technology-driven transformation anchored on smart farming, mechanisation and automation under the National Agro-Food Policy 2021–2030 (DAN 2.0).

“The ministry remains committed to strengthening national food security through a progressive agri-food modernisation agenda, particularly under Strategic Thrust One of the National Agro-Food Policy, which supports smart and modern agriculture,” he said in Parliament today.

He said the modernisation drive has been reinforced under the 13th Malaysia Plan (13MP), with RM50 million allocated to the Technology Development, Mechanisation and Automation (TMA) Programme, of which RM20 million is earmarked for 2026 to introduce Fourth Industrial Revolution elements such as smart farming, agri-robotics and the Internet of Things.

On financing, Chan said Agrobank provided RM112 million in agrotechnology financing in 2024 under the Madani Agrotechnology Financing Programme, followed by RM200 million under the Agri-Food Financing Fund in 2025, along with RM30 million for the Agri-Food Value Chain Modernisation Programme, all offered at a concessional interest rate of 3%.

He added that the ministry has partnered the Securities Commission Malaysia through the Malaysian Innovative Agri-Financing (MIAF) initiative to expand alternative financing options for micro, small and medium enterprises in agriculture, especially those adopting new technologies.

To attract younger participants, Chan said the Agropreneur Muda Programme under the 12th Malaysia Plan provided in-kind grants to agri-entrepreneurs aged 18 to 45, benefitting 3,914 recipients with total grants worth RM86.16 million between 2021 and 2025.

He said this initiative will continue under the Agropreneur NextGen Programme in the 13MP, with RM100 million allocated for targeted in-kind technology assistance through the Agropreneur NextGen Grant.

On market access, Chan highlighted digital marketing efforts led by the Federal Agricultural Marketing Authority (Fama) through Agrobazaar Online, which had registered 15,982 entrepreneurs as at December 2025, generating RM18.5 million in transaction value, supported by integration with platforms such as TikTok Shop and Shopee, as well as 283 K-Shoppe outlets nationwide.

On technology sustainability, Chan said RM150 million had been allocated under the Mechanisation and Automation Programme across the 11th and 12th Malaysia Plans to benefit more than 40,000 farmers, breeders and fishermen, with assets such as machinery, drones and IR4.0-based systems maintained by ministry departments and agencies.

“These assets are properly managed and maintained by the ministry’s departments and agencies to ensure continued use and effective technology transfer,” he said, stressing the importance of ongoing support and capability building in rural areas.

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by AKMAR ANNUAR

MALAYSIA has begun nationwide slope-risk mapping covering key agricultural and highland areas as the government steps up geological safeguards amid growing concern over mud floods and landslides linked to monoculture farming on steep terrain.

In Parliament today, Natural Resources and Environmental Sustainability Minister Datuk Seri Arthur Joseph Kurup (picture) said the ministry, through the Minerals and Geoscience Department Malaysia (JMG), has proactively mapped areas with potential landslide risks nationwide, covering about 2,966 square kilometres, including active highland farming zones.

He was responding to a question from Kubang Kerian MP Datuk Seri Tuan Ibrahim Tuan Man, who asked whether the government would implement comprehensive mapping of monoculture plantations by slope gradient to assess mud flood and landslide risks, drawing lessons from the West Sumatra tragedy in November 2025.

“The ministry has taken proactive steps by mapping landslide-prone areas nationwide, covering approximately 2,966 square kilometres, including active highland agricultural zones such as Cameron Highlands and Kundasang,” Arthur said, adding that the effort is meant to strengthen development planning and integrated slope management.

He said the mapping outcomes are translated into Slope Hazard and Risk Maps (PBRC), which are shared with planning and implementing agencies such as PlanMalaysia and the Agriculture Department to support safer, more orderly and sustainable land use planning.

The PBRC serves as a strategic reference for early preventive measures, routine slope maintenance, determining locations for landslide early warning systems and strengthening land-use controls by relevant agencies, particularly in areas exposed to geological risks.

Arthur said two types of PBRC have been developed so far — linear-based and area-based maps — with responsibilities split between agencies to ensure comprehensive coverage. 

The Public Works Department prepares linear-based maps for federal roads in Peninsular Malaysia, while JMG produces area-based maps for locations beyond roads and highways.

“This division of roles ensures mapping coverage is comprehensive, structured and complementary in supporting safer and more sustainable slope management and development planning,” he said.

Arthur added that regulatory controls are reinforced through mandatory environmental impact assessments (EIA) for agricultural and plantation activities classified under the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 2015, ensuring projects are evaluated thoroughly before approval.

He said JMG and the Department of Environment also play an active role by providing technical reviews at the local authority one-stop centre (OSC) level, aimed at ensuring plantation and agricultural development proceeds in a planned, safe and sustainable manner.

On proposals for comprehensive mapping of plantation activities on steep slopes, Arthur said NRES remains ready to provide technical advisory services to other ministries and agencies, particularly in identifying geological disaster risks linked to land use decisions.

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