How Japan's economic woes will flow on to other Asian economies 9th March 2001 Back to News Menu About the Rat Asia Pacific Management Forum         Add your comments on today's column or any other Asian business topic to the APMF discussion board What's New? Search the Asia Pacific Management Forum database of almost 1,000 pages. Updated weekly. Use today's topical search terms or clear the box and enter your own. Click options for complex or phrase search. Or click on the icon for our full search facilities. Join the APMF email list Monthly updates on new content

A surprising but candid admission from Japanese Finance Minister Kilchi Miyazawa yesterday that Japan's national finances were "close to collapse" triggered off further falls in the Yen to a 19 month low of Y120 to the US dollar. The Japanese NIKKEI stock market index this week continued it's long term malaiseand dramatic 12 month slide. Such a situation will no doubt affect overseas investment and imports, and with the rest of Asia still highly dependent on overseas trade, the double whammy of a slowdown in both the US and Japan does not augur well for a good 2001. A recent Citibank survey comparing regions aggregate trade as % of trade reinforce's the Asia Pacific's comparative exposure. Regional Economy % World 45% Latin America 36% High Income OECD 42% Central & Eastern Europe 70% Asia Pacific 88% Exports to the US and Japan make up around 25% to 40% of the total exports of many Asian countries. Any continued, let alone dramatic, slow downs must cause problems. And the problem is not isolated to Asia. Australia, for example, which has been one of the world's best economic performers for more than a decade has Japan as it's most important trading partner. Allowing currencies to weaken may not be such a bad option, at least relatively, for economic planners in other Asian economies to retain their edge in the manufacturing and export sectors, especially among those countries whose recovery since the crisis has been fuelled by exports. Again, it underlies that Asia's substantive recovery since the Asia crisis has in large part been due to an at-the-time strong US economy, provided much needed demand for Asian imports, especially at the low exchange rates still prevailing as Asia recovered. In all 2000 was not a bad year for Asia. Many economies performed well in the first three quarters at least. Even Indonesia posted an unexpected 4% economic growth. But that was in the context of still solid economic growth world wide, that fuelled recovery. At the same time, real structural and economic reform in Asia's tigers and tiger cubs petered out after a promising start, as local political elites preferred to move to strengthen their own domestic power bases. Japan, throughout 1999 and 2000 also moved to protect their business interests in East Asia and South East Asia, where massive investments had been made during the past two decades. But with the weakening Yen, and lowering consumer sentiment reducing the profits of Japanese companies, capacity to continue such survival strategies is also reducing.

research intelligence | street intelligence | market intelligence

© Asian Business Strategy & Street Intelligence Ezine 2001
The views expressed here may not necessarily reflect those of partners, publishers, editorial board nor sponsors of the Asia Pacific Management Forum

email updates | email this page | discuss | search | today's asian business strategy news | advertise | about

daily asian news, research & commentary for the international business strategy, market research & strategic management professional