Troubled U.S. , Japan economies worry Asia
USA Today
HONG KONG — Japan's sputtering economy is bad news for the rest of Asia, a region already struggling with a slowdown in its No. 1 export market, the United States.
"If America is knocked out and Japan is knocked out, what is going to happen to Asia?" asks Hong Kong exporter Bolly Kwee.
The effects are felt from Singapore to Seoul:
• Exports: Only 11 percent of East Asia's exports go directly to Japan. But Japan's share is probably twice that because many goods Asian countries sell each other are components that eventually reach Japan, says economist Tim Condon at ING Barings. Slowing sales to a stalled Japan would hurt Asian economies.
• Investment: In the 1980s and most of the '90s, Japan made huge investments in Asia. But since the '97 crisis, Japan's direct investment in Asia has plunged from $12.4 billion (at today's exchange rates) for fiscal year 1997 to $6.7 billion in fiscal '99. Japanese direct investment in Asia was down to $2.5 billion, off 39 percent from a year earlier, in the first half of fiscal 2000, which ends March 31. There's little hope for a rebound as long as Japan struggles.
• Currencies: Several Asian countries, particularly South Korea, compete in export markets against Japan. The yen has dropped as economic troubles deepened, giving Japan a price advantage in foreign markets. South Korea's won also must fall to keep South Korean exports competitive.
• Result: The yen is down 13 percent the past year against the U.S. dollar, the won 12 percent.
Falling currencies triggered the most recent Asian crisis.
Still, few analysts are worried about a repeat of 1997.
For one thing, Asian countries have shed much of the short-term foreign debt that left them so vulnerable.
And strong growth in China is helping prop up the region.
Most economists expect Asian economic growth to decelerate to 5 percent or 5.5 percent this year from almost 8 percent in 2000, largely because of the U.S. slowdown.
In the old days, Japan could offset trouble in the United States, but no more.
"Japan is unable to provide the kind of economic leadership that it did" in the late '80s, says Michael Yahuda of the London School of Economics.
