Levent Gürses
July’s inflation figures were announced on Monday. According to the Turkish Statistical Institute (TÜİK), the Consumer Price Index rose by 31.75 per cent year-on-year and by 1.78 per cent month-on-month. The index has risen by 19.86 per cent since the start of the year and by 31.90 per cent based on twelve-month averages. The annual rate of food inflation stood at 37.53 per cent.
We continue to break records in terms of inflation. We are the fifth country in the world with the highest headline inflation. Venezuela is first at 544 per cent, followed by Iran at 88 per cent, South Sudan at 58 per cent and Argentina at 33.5 per cent.
In terms of food inflation, we are in third place. The ranking is as follows: Venezuela at 585 per cent, Iran at 105 per cent, and Turkey at 37.5 per cent…
It is not just in terms of inflation; we are also sliding further down the global rankings in economic and social indicators. Undoubtedly, these are all closely interlinked…
Turkey’s position in terms of key indicators is as follows:
- According to the 2025 data from the Rule of Law Index compiled by the World Justice Project, we have slipped to 118th place out of 143 countries. In 2015, we were in 80th place. A drop of 38 places in 10 years…
- In the World Press Freedom Index, published annually by Reporters Without Borders, we are ranked 159th out of 180 countries.
- In the Corruption Perceptions Index published by Transparency International, Turkey has fallen by 17 places in the last year, slipping to 124th place out of 182 countries as of the 2025–26 period.
- In the Prosperity Index by the Prosperity Institute, we are ranked 102nd out of 161 countries. Even Lebanon, Nepal, India, Morocco, Tunisia, Armenia and Georgia are in a better position than us…
- In the V-Dem Project’s (Varieties of Democracy) Freedom of Expression Index 2025, we are ranked 152nd out of 179 countries.
- In the V-Dem Project’s (Varieties of Democracy) Free and Fair Elections Index 2025, we are ranked 105th out of 178 countries.
We hold the record for the highest rent increases among OECD countries.
Taking 2015 as the base year (100), by the second quarter of 2026, the rent index in Turkey had reached 2,206. Hungary follows us with a score of 212.Among the 38 OECD member countries, as of May, we rank first in annual energy inflation at 45 per cent. The US, which comes next, stands at 23.5 per cent. As for food inflation, as of June, we are the OECD country with the highest rate at 35.4 per cent. Colombia follows us with 6.8 per cent.
Among OECD countries, we are second from the bottom in terms of social spending. We are only ahead of Mexico.We are last among OECD countries in terms of healthcare expenditure. Whilst OECD countries allocated an average of 9.3 per cent of their GDP to healthcare in 2024, this figure stands at 4.7 per cent in Turkey. The top performers are: the US (17.2 per cent), Germany (12.3 per cent) and Austria (11.8 per cent).Once again, amongst the 38 OECD member countries, we rank third from the bottom in terms of expenditure per pupil, behind Mexico and Romania.
Further details regarding inflation are as follows:Inflation for July was expected to be 1.82 per cent. Annual inflation was forecast to fall from 32.11 per cent in June to 31.80 per cent.On an annual basis, the highest price increase was recorded in the housing, water, electricity, gas and other fuels group. Prices in this group rose by 40.32 per cent, contributing 5.21 percentage points to annual inflation. Prices in the food and non-alcoholic beverages group rose by 37.53 per cent year-on-year. This group’s contribution to annual inflation was 8.94 percentage points. Prices in the transport group rose by 30.83 per cent year-on-year, contributing 5.22 percentage points.
Transport led the way in monthly increasesOn a monthly basis, the highest price increase was recorded in the transport group. Prices in this group rose by 2.59 per cent compared with the previous month. The housing group rose by 2.25 per cent month-on-month, whilst the food and non-alcoholic beverages group rose by 1.61 per cent. Transport’s contribution to monthly inflation was 0.44 percentage points, housing’s contribution was 0.27 percentage points, and food’s contribution was 0.40 percentage points.
Price increases were observed in 117 of the 174 sub-expenditure groups analysed by TÜİK. Prices fell in 50 sub-groups. There was no change in 7 sub-groups.According to ENAG, July inflation stood at 50.49 per centThe Inflation Research Group (ENAG), comprising academics, reported July’s inflation figures as 3.07 per cent month-on-month and 50.49 per cent year-on-year. According to ENAG, June’s inflation figures had been 51.49 per cent year-on-year and 1.94 per cent month-on-month.
According to data from the Istanbul Chamber of Commerce (İTO), annual inflation in Istanbul in July rose by 35.20 per cent compared with the same period last year.
The rent increase rate for August has been confirmed
The published CPI figures have also determined the rent increase rate to be applied in August. The rent increase rate, calculated based on the twelve-month average of the CPI, stood at 31.90 per cent. The rent increase rate applied in July had been 32.03 per cent.
A tenant paying 10,000 TL in rent will see their rent rise by 3,190 TL to 13,190 TL. For those paying 50,000 TL in rent, the increase amounts to 15,950 TL, bringing the new rent to 65,950 TL.
Karahan: Interest rate cuts can only be effective when inflation is under control
Central Bank Governor Karahan stated:
“Interest rate cuts can only be effective when inflation is under control. As inflation expectations improve, credit and bond yields are falling. The decline in the policy rate is being reflected in market rates.
”DİSK-AR: Minimum wage has lost 5,576 lira in value
According to the Inflation Bulletin published by the DİSK Research Centre (DİSK-AR) following the Turkish Statistical Institute’s (TÜİK) July inflation figures, the minimum wage lost 5,576 lira in value during the first six months of the year.
The DİSK-AR Bulletin summarises as follows:Whilst general prices have risen 36.3-fold compared to 2005, food prices have risen 55.2-fold.The minimum wage suffered a loss of 5,576 TL in the sixth month of the year.
Rent, housing and transport costs are rising. Those on low incomes are cutting back on food to cover rent and transport costs.
TÜİK continues to withhold the list of commodity prices. Despite a court ruling, TÜİK has once again failed to publish the list of commodity prices.Different social classes and groups are experiencing the financial hardship resulting from inflation in very different ways.
Whilst the lowest 20 per cent income group receives 6.4 per cent of total income, food accounts for 29.2 per cent of this group’s expenditure.The highest 20 per cent income group receives 48 per cent of total income, whilst food accounts for just 12.4 per cent of their expenditure.Workers spent half the month working just to keep up with inflation
According to the Wage Loss Monitoring Report published by DİSK-AR for August, approximately 17 million insured workers spent half of July working just to cover inflation, taxes and deductions. The report stated that, for the period January–July 2026, wage losses due to inflation amounted to 798.6 billion TL, losses due to income and stamp duties totalled 688.3 billion TL, and the total loss was calculated at 1 trillion 486.8 billion TL.
Mehmet Şimşek: Rigidity in service inflation is easing
In his assessment following the release of the July inflation figures, Mehmet Şimşek, Minister of Treasury and Finance, stated that, thanks to the policies implemented, rigidity in service inflation had eased and the disinflation process was continuing.
In a statement posted on his social media account, Şimşek pointed out that disinflation was continuing despite challenging global and geopolitical conditions, noting the following:
“Thanks to the measures we have taken and the impact of the disinflation process, rigidity in service inflation is decreasing. Annual inflation in education and rent has fallen by 31 and 34 points respectively compared with the same month last year. Whilst effectively managing risks arising from geopolitical developments, we are not compromising on fiscal discipline or our goal of sustainable price stability.”
Prof. Dr Demiralp: Emphasis should be placed on expenditure that curbs demand and boosts supply
Prof. Dr Selva Demiralp, a lecturer at Koç University, wrote an article for BBC Turkish in which she proposed a solution, noting that cutting interest rates or allowing a sudden depreciation of the exchange rate before inflation falls would do more harm than good. She recommended developing narrowly focused, low-cost incentives for exports and investment, and prioritising expenditure that boosts supply.
Prof. Dr Selva Demiralp’s article reads as follows:“Whilst there are many historical examples of disinflation targeting through real exchange rate appreciation, in countries with chronic current account deficits, poor outcomes are also observed if a soft exit from these policies cannot be achieved.
The same scenario played out in Chile and Argentina in the late 1970s, and in our own experience in 2000–2001. To curb inflation, the exchange rate was allowed to appreciate in real terms; the current account deficit was financed by capital inflows; and when these inflows reversed, collapse became inevitable.
The ‘way out’ of this impasse lies in changing our growth model, which generates a chronic current account deficit. Backtracking on disinflationary policies is not the answer; we must remember that cutting interest rates or allowing a sudden depreciation of the exchange rate before inflation has fallen will do more harm than good.
So what should be done? To permanently prevent the chronic current account deficit from hampering disinflationary policies and to give struggling producers some breathing space, it would be appropriate to develop narrowly focused, low-cost incentives targeting exports and investment rather than broad-based subsidies; fiscal policy should also prioritise expenditure that boosts supply over expenditure that stimulates demand.”
The budget is at an impasse: a 370.4 billion TL toll guarantee
Excessive toll guarantees granted to road and bridge contractors have driven the budget into a dead end. It has been established that a total of 370.4 billion TL was transferred to contractors from the General Directorate of Highways’ budget between January 2018 and June 2026, of which 49.6 billion TL is due in the first half of 2026.
According to a report by BirGün, the General Directorate of Highways’ expenditure on guarantee payments to contractors amounted to 49 billion 640 million 288 thousand TL in the first half of 2026 alone. It is projected that guarantee payments will exceed 100 billion TL by the end of 2026.
The Directorate’s expenditure under the ‘Transfers to Households’ heading was as follows for certain periods:
• 2018–2019: 8.5 billion TL
• 2020–2021: 24.3 billion TL
• 2022–2023: 93.2 billion TL
• 2024–2025: 145.2 billion TL
• 2026 (January–June): 49.6 billion TL
1.2 billion dollars in support for meat imports, 405 million dollars for livestock farming
Whilst domestic livestock farmers are withdrawing from production due to rising costs, the direction of public funding has not changed. According to a report by BirGün, whilst 1 billion 173 million 867 thousand dollars was spent on live animal and red meat imports in the first six months of 2026, the funds allocated to livestock support services during the same period remained at approximately 405 million dollars. Consequently, the foreign currency paid for imports amounted to approximately 2.9 times the funds allocated to support producers.
Sharp contraction in the automotive market in July
Car and light commercial vehicle sales in Turkey fell by 10.72 per cent year-on-year in the January–July period, totalling 638,965 units. According to January–July figures from the Automotive Distributors and Mobility Association (ODMD), car sales fell by 12.14 per cent year-on-year during this period to 502,712, whilst light commercial vehicle sales dropped by 5.05 per cent to 136,253. Sales of cars and light commercial vehicles, meanwhile, fell by 10.72 per cent to 638,965 during the January–July period.
The car and light commercial vehicle market contracted by 25 per cent in July alone, with sales volumes falling by 25.79 per cent for cars and 22.17 per cent for light commercial vehicles.
Bill proposals for debt write-offs await the General Assembly
Following the debate on the Framework Law, numerous bill proposals concerning citizens in debt in 2026 were submitted to the Turkish Grand National Assembly (TBMM), which is due to go into recess. The proposals referred to the relevant committees have not yet become law.
Among the bills submitted to the TBMM, the most notable was the one tabled by Doğan Bekin, an MP for Istanbul from the New Prosperity Party. The proposal envisages the write-off of the principal debt, as well as accrued interest, late payment charges and administrative fees—whether paid in full or spread over a period of up to five years—for those with consumer credit and credit card debts where enforcement proceedings have been initiated.
In a bill tabled by a Mersin MP from the DEM Party, it was proposed that the public debts of natural and legal persons registered in the Farmer Registration System be restructured and that the collection of such debts be waived. In yet another proposal submitted by Bozan, it was proposed that late payment interest, late payment surcharges and incidental claims on debts owed by tradespeople and artisans to public institutions and organisations be written off, whilst the principal amounts be paid in installments over a period of up to thirty-six months. In yet another proposal submitted by Bozan, it was requested that the debts of natural and legal persons registered in the tradespeople and artisans’ register to tax offices and the Social Security Institution, as well as premium debts arising under the BAĞKUR scheme, be restructured.
A proposal tabled by Gülcan Kış, CHP MP for Mersin, provided for the restructuring of credit card and personal loan debts held with banks, financial institutions and asset management companies that arose prior to 1 January 2026.
A dire picture for R&D; share drops to 1.50 per cent
R&D expenditure revealed a decline in the allocation of budgetary resources intended to strengthen research and development. TÜİK data showed that the share of R&D stood at 1.58 per cent in 2025, falling to 1.50 per cent in 2026.
In 2025, 253 billion 544 million lira was spent on R&D from the central government budget. The proportion of R&D expenditure within the central government budget stood at 1.58 per cent. The ratio of these expenditures to the gross domestic product (GDP) – which stood at 63 trillion 20 billion 906 million lira – was calculated at just 0.40 per cent. The ratio of R&D expenditure to GDP has remained at around 0.41 per cent for the past 10 years.
According to the 2026 forecast based on initial budget allocations, 308 billion 568 million lira has been allocated to R&D from the central government budget this year. However, despite the increase in the allocation, R&D’s share of the central government budget has fallen to 1.50 per cent.
We rank 10th from the bottom in R&D among OECD countries
R&D is recognised as one of the key elements of high value-added production, technological innovation, increased productivity and economic development. According to OECD data, the country allocating the highest share to R&D expenditure is Israel at 6.8 per cent, followed by South Korea at 5.1 per cent and Japan at 3.6 per cent. Turkey, however, ranks 10th from the bottom among 31 countries based on 2024 data.
Trade deficit rose to 10 billion 370 million dollars in June
According to data released by TÜİK, Turkey’s exports rose by 21.7 per cent and imports by 23.0 per cent in June. The trade deficit grew by 26.2 per cent over the same period, reaching 10 billion 370 million dollars.
Exports rose by 21.7 per cent compared with the same month last year, reaching 24 billion 915 million dollars. Imports, meanwhile, rose by 23.0 per cent to 35 billion 285 million dollars. In the January–June period, exports rose by 3.5 per cent to $135,980 million, whilst imports increased by 4.6 per cent to $189,120 million.
The trade deficit rose by 26.2 per cent in June, climbing from $8,218 million in the same month last year to $10,370 million. The export-to-import coverage ratio also fell from 71.4 per cent to 70.6 per cent during this period. Whilst the deficit rose by 7.4 per cent to 53 billion 140 million dollars in the January–June period, the coverage ratio fell from 72.6 per cent to 71.9 per cent.
The manufacturing sector accounted for 93.7 per cent of exports
By economic sector, the manufacturing sector’s share of exports in June stood at 93.7 per cent, whilst the share of the agriculture, forestry and fisheries sector was 3.5 per cent and that of mining was 2.0 per cent. In the January–June period, the manufacturing sector’s share rose to 93.8 per cent, agriculture’s share to 3.7 per cent, and mining’s share to 1.8 per cent.
The share of high-tech products remained limited
In June, the share of high-tech products in manufacturing exports stood at 4.4 per cent. In terms of imports, the share of high-tech products in manufacturing imports was calculated at 12.1 per cent.
Germany was the top export destination
In June, Germany was Turkey’s top export destination, with exports totalling 1 billion 971 million dollars. Germany also ranked first in the January–June period, with exports to this country totalling 11 billion 245 million dollars. Germany was followed, in order, by the USA, Italy, the United Kingdom and Spain.
In June, the country to which the most imports were made was China, with 5 billion 276 million dollars. This was followed by Russia, with 3 billion 673 million dollars. During the January–June period, China also ranked first with $26,310 million, followed by the Russian Federation, Germany, the US and Switzerland.
Vice President Yılmaz: Annual exports have reached an all-time high in the history of the Republic
Vice-President Cevdet Yılmaz stated, “During this period, when the weak outlook for world trade persists due to the impact of the conflict environment, Turkey’s exports are maintaining their high level thanks to a strong production infrastructure.” Yılmaz reported that annualised exports had reached 278.6 billion dollars, the highest level in the history of the Republic.
In a post on his social media account regarding the July foreign trade figures, Yılmaz said, “During this period, when the weak outlook for global trade persists due to global uncertainties and the impact of the conflict environment, Turkey’s exports are maintaining their high level thanks to a strong production infrastructure and diversified export markets. Disruptions in the supply chain caused by the war and geopolitical tensions in our region,
rising logistics, energy, insurance and financing costs, imports saw a controlled increase of 4.7 per cent year-on-year between January and July. Thanks to the measures we have taken to mitigate the impact of geopolitical tensions, we forecast that the current account deficit will remain at sustainable levels with only a limited increase for the remainder of the year.”
Tourism revenue fell to $15.9 billion
Tourism, one of the economy’s most important sources of foreign exchange, is in a slump due to high inflation and the war situation in neighbouring countries. The Turkish Statistical Institute has published the tourism statistics for the second quarter of 2026. According to the data released, tourism revenue fell by 2.6 per cent compared with the same quarter last year to $15.9 billion, whilst the number of visitors to the country decreased by 5.1 per cent.
The number of visitors departing from Turkey fell by 5.1 per cent compared to the same period last year, dropping to 15,581,014. Turkish citizens residing abroad accounted for 16.2 per cent of these visitors, totalling 2,527,687 people. Meanwhile, a 16.5 per cent increase was observed in the number of citizens travelling abroad. Tourism expenditure rose by 7.4 per cent. Turkish citizens residing abroad accounted for 15.6 per cent of tourism revenue generated by visitors.
A 6.37 TL reduction in diesel prices was passed on to the Special Consumption Tax (ÖTV), bringing the price down to 1.05 TL
Between 30 July and 7 August 2026, a price increase of 3.71 TL was applied to diesel and 2.42 TL to autogas (LPG). However, the 6.37 TL reduction in the price of diesel, resulting from the fall in oil prices on international markets, was passed on to the excise duty (ÖTV) in accordance with the escalator system, meaning it was reflected at the pump as a reduction of 1.05 TL.
Under a decision published at the beginning of July, periodic automatic excise duty increases were suspended. Consequently, the automatic fixed excise duty increase that would otherwise have been applied in the second half of 2026 (July–December period) in line with the Yİ-ÜFE rate was not implemented. It was decided that, when refinery prices fall, the full amount of this reduction would be applied as an increase (a tax reduction).
For the August and September period, a rule was introduced whereby 75 per cent of price increases would be passed on at the pump, whilst 25 per cent would be covered by the excise duty.Last week’s price changes for motor fuels were as follows:31 July: A price increase of 3.71 TL per litre was applied to the diesel group. With this increase, diesel prices exceeded the 80 TL threshold in major cities.
There was no change in petrol prices on this date.4 August: A price increase of 2.42 TL per litre was applied to autogas (LPG) prices and passed on at the pump.5 August 2026: Due to a fall in international oil prices, a calculated reduction of 6.37 TL on diesel was offset against the excise duty credit account under the escalator system; as a result, drivers saw a reduction of only 1.05 TL at the pump.
Increase in Central Bank reservesIt was calculated that the CBRT’s total reserves rose by approximately 1.6 billion dollars to 164.2 billion dollars in the week ending 31 July. Reserves, which stood at 162.6 billion dollars in the week ending 24 July, rose to approximately 164.2 billion dollars in the week ending 31 July. Reserves, which had fallen sharply in March, had dropped to 149.2 billion dollars in the week ending 26 June – their lowest level in around six months.
Oil prices fell following Trump’s decision on Iran; a drop of over 5 percent
Oil prices fell sharply, particularly in the first half of the week, as tensions in the Middle East eased. As of the morning of Friday 7 August, a barrel of US West Texas Intermediate crude was trading at $78.35, down 7.52 per cent for the week, whilst a barrel of Brent crude had fallen to $83.87, down 4.68 per cent. Brent crude, in particular, fell below $80 to $78 on Tuesday 4 August.
The main reason for the fall was US President Donald Trump’s decision to postpone a potential military intervention against Iran and to prioritise the search for a diplomatic solution to the nuclear deal. Expectations that the talks between Iran and Oman could pave the way for a potential peace agreement with the US also pushed oil prices down. Optimism regarding the Strait of Hormuz is also putting downward pressure on prices.
The factors behind the fall in oil prices are as follows:Reduction in Geopolitical Risks: Progress in diplomatic contacts between the US and Iran, and expectations of a lasting settlement, have eroded the ‘war premium’ that had been keeping prices high.Security in the Strait of Hormuz: Iran and Oman have reached an agreement on transit through the Strait of Hormuz. The perception that the risk of supply disruptions at this critical chokepoint for global oil trade is diminishing has increased selling pressure in the market.
Unexpected Stock Builds: The rise in US crude oil stocks, contrary to market expectations, has reinforced the sense that supply is adequate.Global Demand Concerns: Concerns that global economic growth may slow and industrial demand may weaken are weighing on prices.What does the Strait of Hormuz agreement entail?
On Friday 7 August, Brent crude rose above $83 per barrel as tensions in the Strait of Hormuz flared up again, causing market turmoil and raising fresh doubts about efforts to fully reopen this vital shipping route.
Iran launched attacks on locations in the strait that it described as ‘hostile targets’ following reports of explosions near Qeshm Island. Under the proposed Iran-Oman agreement governing the waterway, Tehran aims to ban the passage of US and Israeli vessels through the Strait of Hormuz and to require countries deemed hostile to pay compensation before being granted passage. Iran has also proposed fines equivalent to 20 per cent of a vessel’s cargo value for violations and stated that the strait would only be fully reopened once the US naval blockade had been lifted. The Iranian parliament is currently examining a draft proposal that sets out stricter conditions than the markets had anticipated.
The price of an ounce of gold has risen above $4,300In line with the fall in oil prices, gold prices are rising as tensions in the Middle East ease and expectations of a US Federal Reserve interest rate hike weaken. Last week, the price of an ounce of gold briefly rose above $4,300. As of Friday morning, 7 August, it had gained 5.59 per cent over the week to trade at $4,276. The price of an ounce of silver also rose by 8.23 per cent over the week to reach $62.40. A structural supply shortage that has persisted for years, coupled with record industrial demand from the green energy and artificial intelligence sectors, is causing silver to rise faster than gold.
Meanwhile, the price of a pound of copper has reached $6.65, hovering close to its all-time high. The price of a pound of copper had previously hit a record high of $6.67 on 13 May.Citi and UBS: Back to $5,000US-based Citi, in its latest analysis, assessed that gold prices could trade sideways or experience a limited pullback over the coming month. However, the bank forecast a strong rise in the final quarter of the year, predicting that the price of gold could reach the $4,500 per ounce level. According to Citi’s forecast, should the upward trend continue, the price of gold per ounce will reach the $5,000 level in the first half of 2027.Swiss bank UBS, meanwhile, forecast that if the Fed pauses its interest rate hikes and central banks continue their strong buying, the price of gold per ounce could rise to as high as $5,200 by June 2027. The bank highlighted the risk of a pullback to as low as $3,850 in the short term.
Aydın Group, owner of A101, has officially acquired CarrefourSA
The transfer of 89.28 per cent of CarrefourSA’s shares to Yeni Mağazacılık (A101), a subsidiary of Aydın Group, was officially completed today following the receipt of all necessary legal approvals, including that of the Competition Authority. With the completion of the transfer, neither Sabancı Holding nor the Carrefour Group retains any stake in the company.According to a statement from the company, A101 and CarrefourSA, which operate under the Yeni Mağazacılık umbrella, will continue to operate independently under separate management structures, in distinct segments and whilst maintaining their own brand identities. With the formalisation of the acquisition, Hatice Evren has been appointed CEO of CarrefourSA. As of the end of 2025, CarrefourSA has over 1,250 stores, including franchisees, across 77 provinces.
By buying yen, the US is effectively bailing out its own bondsLast week, the US and Japan carried out a coordinated intervention to halt the yen’s depreciation, which had approached its lowest levels in 40 years. The US purchased billions of dollars’ worth of yen to prop up the value of the Japanese yen.
This move, Washington’s first intervention to bolster the yen in the last 30 years, came at a time when the Japanese economy is facing rising import costs and inflationary pressures. For Japan, which is heavily reliant on imports for energy and food, a weak yen increases the cost of goods entering the country. This situation is both increasing companies’ costs and leading to higher prices for consumers.
Japan has spent billions of dollars since 2022 in an attempt to limit the yen’s decline, but has been unable to halt its depreciation. According to a report by Medyascope, one of the reasons for the decline is that investors continue to sell the yen. Global developments are also increasing the pressure on the Japanese currency.
Japan meets a significant portion of its energy needs from the Middle East. The war in Iran has slowed the flow of oil and natural gas from the region, driving up energy costs and further fuelling inflation in the country.
The Bank of Japan’s policy of keeping interest rates at exceptionally low levels is also among the factors eroding the yen’s value. Low interest rates make the Japanese currency less attractive to international investors. As investors turn to countries and currencies offering higher returns, selling pressure on the yen is increasing. Japan’s high public debt is also fuelling concerns about the economy. The government is spending far beyond its tax revenue to revive the stagnant economy and meet the needs of its ageing population.
The country’s total public debt has exceeded 200 per cent of gross domestic product. With this ratio, Japan has the highest level of public debt among G20 countries.
Why did the Trump administration intervene?
The first sign that the US was preparing to intervene emerged during a cabinet meeting held by the Trump administration on Friday 31 August. A note in front of US Treasury Secretary Scott Bessent was seen to contain the phrase: “Actions to be taken: Purchase 5–10 billion dollars’ worth of Japanese yen”.
US President Donald Trump confirmed that the Treasury had purchased billions of dollars’ worth of yen and stated that the intervention would be “good for the global economy”. However, according to experts, Washington’s intervention is not driven solely by a desire to support the Japanese economy.
Japan is selling US government bonds to generate the funds required to purchase yen. US Treasuries are held by many countries as part of their national reserves. However, the sale of large quantities of these bonds can lead to an increase in the interest rates the US Treasury pays when borrowing.
This means the US government has to borrow at a higher cost to finance public spending. According to economists, the Trump administration aims to limit Japan’s sales of US Treasuries by supporting the yen.
A difficult turning point; German automotive giants are laying off thousands of workers
Chinese rivals’ growing market share is forcing the German automotive sector to downsize. Once a symbol of German industrial strength, the automotive sector and its large workforce have now become a costly burden in the face of increasing competition from Chinese electric vehicle manufacturers. Following Volkswagen, Porsche, Mercedes and Audi, BMW is also laying off thousands of staff.
BMW is the latest manufacturer to announce redundancies
According to a report by Deutsche Welle, BMW has become the fifth German car manufacturer to announce extensive redundancies at a time when the German automotive sector is battling Chinese rivals. It has announced that it will make around 8,000 staff redundant worldwide. This figure represents approximately 5 percent of its total workforce of 154,000. BMW was thought to be more resilient to competition from China. However, the company announced last month that its sales in China had fallen sharply. BMW’s vehicle deliveries in China fell to their lowest level since 2017 last year. In the three-month period ending at the end of June, deliveries fell by 30 per cent compared with the same period the previous year. It announced that net profit had fallen by 35 per cent to $1.4 billion in the second quarter.
Volkswagen is planning the largest cuts
Europe’s largest car manufacturer, Volkswagen, announced last month that it was doubling its job-cutting programme, planning to make around 100,000 people redundant. The company also plans to close four of its factories in Germany.
Trade unions and the state of Lower Saxony – which holds 20 per cent of the company’s voting rights and has the power to veto major decisions – have rejected the latest plans. Volkswagen had previously announced it would cut 50,000 jobs. Volkswagen is known for its high workforce, totalling 630,000 people worldwide. When joint ventures in China are included, this figure rises to 680,000.
The Wolfsburg-based giant employs around 60 per cent more people than Toyota, despite producing a similar number of vehicles.
Mercedes is downsizing without mass redundancies
Mercedes-Benz reached an agreement with its works council last March on a plan to achieve savings of 5 billion euros by 2027. However, the company has ruled out compulsory redundancies at its German factories. It argued that the reforms could be implemented through voluntary departures. By March this year, around 5,500 employees in the administration, research and development, and information technology departments had left the company after accepting severance packages. Production workers, however, remained protected.
It was also reported that further staff reductions had been made at the company’s operations in China.
Last month, Mercedes postponed until 2027 a bonus payment due to approximately three-quarters of its employees in Germany. The company also proposed extending the weekly working hours from 35 to 40 hours without additional pay.
The company’s net profit rose by 13.5 per cent in the second quarter to 1.09 billion euros. However, operating profit in the core automotive division fell by a quarter to 909 million euros.
Audi is also under pressure
Audi, a subsidiary of Volkswagen, announced last year that it would cut 7,500 jobs in Germany by the end of 2029. The company announced that it would not resort to compulsory redundancies. It stated that staff reductions in the administration and research and development departments would be carried out through voluntary schemes and early retirement. However, last month, Audi’s Neckarsulm plant was included by its parent company, Volkswagen, among the factories that could be closed by 2030. This could affect around 15,000 employees.
Merger talks between AstraZeneca and Bristol Myers Squibb
British pharmaceutical giant AstraZeneca and US pharmaceutical company Bristol Myers Squibb are holding merger talks. Should the talks proceed positively and an agreement be reached, a merger worth 400 billion dollars will take place. The door has been opened to one of the largest mergers in the global pharmaceutical sector in recent years. According to sources close to the matter interviewed by the Financial Times, the companies have been holding talks on a merger in recent months. UK-based AstraZeneca and US-based Bristol Myers Squibb have held preliminary talks regarding a deal that could bring the two companies under one roof. AstraZeneca’s market capitalisation stands at approximately $264 billion, whilst Bristol Myers Squibb’s is around $133 billion.