Asia-Pacific markets’ ‘overblown’ fears of US recession led to needed correction: analysts

Despite market turmoil, economists see the downturn as a controlled response to inflation

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A pedestrian passes a screen showing real-time stock market information in Tokyo, Japan, on August 5. Photo: Xinhua

Published: 10:00am, 7 Aug 2024Updated: 7:02pm, 7 Aug 2024

Concerns over a potential US recession roiled markets across Asia Pacific this week amid rising business insolvencies, but economists suggest these developments reflect a necessary correction as central banks address continue to tackle inflation.

Japanese stocks suffered the biggest one-day drop since 1987 on Monday, while the Australian stock market’s ASX 200 was pummelled following disappointing employment figures from the US last week that led to concerns the data all but confirmed a recession was under way.

Other Asian markets, including South Korea, China and Hong Kong also saw significant drops, reflecting broader anxiety about the global economic outlook.

But economists said much of this was “noise”.

“The worry of a recession is somewhat overblown. Yes, we have seen a softening in labour market conditions, in hiring, but you have to soften, because that’s what the tighter monetary policy is supposed to achieve,” said Song Seng Wun, an economic adviser at the financial services firm CGS.

“We’re not talking about a sharp deceleration in the employment numbers, hiring is still taking place.”