ECONOMY-JAPAN: Reluctant Saviour in Asia’s Crisis?

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Feb 11 1998 (IPS) - Hiroshi Tada, a 51-year-old businessman, scoffs at the idea that Japan must play the role of Asia’s saviour during its economic crisis.

“The way I see it is through my pocket,” said Tada, who owns an appliance shop in the sprawling suburb of Saitama in Tokyo.

“My customers have dropped drastically in the past two years, and I now have to manage with only one additional staff,” he added. “I leave the shop midnight and keep worrying about how to make ends meet.”

“Japan must deal with these problems before going out to help others,” he concluded.

Tada is far removed from the world of financial managers, but his sentiments parallel the national mood toward Asia’s crisis. Plagued by corruption scandals, banking disasters and its own sluggish economy, the Japanese are in no mood to be overly generous to their neigbhours.

Yet as East Asia region is mired in a slowdown, countries from Asia to the United States are looking to Japan — the region’s biggest economy — and pressuring it to do more for its needy neighbours.

Against a backdrop of trade tensions, Japanese and American officials have been trading accusations about whether Tokyo is helping out enough, not just by contributing to bailout schemes, but by opening its markets to Asian exports. Some U.S. officials and analysts have called Japan’s efforts to stimulate its sluggish economy inadequate.

Within Asia, expectations are also high of Japan as the world’s largest creditor nation and leading investor in Asia.

“I think Japan should be a little bit more forthcoming in terms of extending help to the ASEAN (Association of South-east Asian Nations) to help them recover,” Malaysian Prime Minister Mahathir Mohamad said this week.

In Tokyo for a visit that began Monday, Malaysian Finance Minister Anwar Ibrahim told his Japanese counterpart Hiraku Matsunaga that Japan ought to play an active role in the Asian crisis by further expanding its imports from the region.

Japan says it is well aware of its role. As early as December, Prime Minister Ryutaro Hashimoto said: “The most effective action Japan could take to help in the crisis is to steady itself.”

At the World Economic Forum in Switzerland this month, deputy finance minister Eisuke Sakakibara denied Tokyo was dragging its feet: “We are doing our best to try to resolve the Asian crisis, and we are doing our best to pump up demand in our domestic economy.”

Analysts are looking forward to the contents of a stimulus package that Tokyo is scheduled to unveil by Feb. 20, which would determine whether Japan can indeed nudge its economy toward growth, and pump domestic demand to take in more exports.

Singapore has also urged Japan to help pull out Indonesia out of its economic doldrums by supporting a trade financing initiative that would guarantee payments for Indonesia’s imports.

Apart from being preoccupied with domestic problems, Japan has been wary of catching the Asian financial disease. Flushed with financial assets held by individual despositors and investors, the finance ministry has made massive purchases of yen to protect Japan from being hit by similar currency turmoil.

But even some economists at home are saying Japan must increase its profile and are dismayed that it has allowed the United States to lead the way in helping Asia.

Japan is partly responsible for the bubble-based finance system in Asia, since its banks supported excessive investments there without worrying about the consequences, one economic analyst here said. Thus, it is only natural that more is expected from Tokyo.

Japan, others add, should buy more goods from troubled Asian economies to help them recover some of their export muscle. Japan must remember that the American market’s willingness to absorb its goods helped it recover from the ravages of the Pacific War, they point out.

C.K. Kwan, an Asia expert with Nomura Research Institute, concedes there is room for improvement although Japan has been generous in its financial assistance to South-east Asia.

In the case of South Korea, Japanese points out that it promised Seoul 10 billion U.S. dollars — or twice as much as the 21 billion dollar contribution from Washington.

Requests from Indonesia, Japan’s largest South-east Asian trading partner, were answered promptly with a loan of 5 billion dollars. Hashimoto pledged an 18.5 billion dollar trade insurance credit line for South-east Asia.

But these dollops of money are not enough to help ailing economies address their crises of debt, bloated overnight by currency falls. Indonesia alone owes 23 billion dollars to Japanese banks.

Thai officials have said that while Japan has been helpful in giving financial aid, its record in giving South-east Asia market access is “something we still have to work on”.

However, U.S. insistence on Japan opening its markets is not due to pure altruism on South-east Asia’s behalf, as it has long been trying to pry open the Japanese market on account of its huge trade surplus.

Already, American officials have warned Tokyo against using the crisis as a reason to go slow on its vow to open its markets.

U.S. Treasury Secretary Robert Rubin called for faster deregulation to boost domestic demand as a way of leading the region’s recovery, though forecasts say GDP growth for Japan’s economy this year may be zero or even become negative.

Washington point outs that domestic spending comprises only 60 percent of Japanese GDP, in contrast to 68 percent in the United States. A hiked consumption tax imposed in April 1997 also cooled consumer and household spending in Japan.

In contrast, trade between Japan and South-east Asia has been growingly sharply in the past decade. Japan is the source of 40 percent of South-east Asia’s imports, and Japan’s exports to East Asia greatly exceed those to North America.

But Asia’s turmoil and Tokyo’s domestic woes are taking its toll on the Japanese economy — not least in terms of weaker overseas investment and cutbacks by manufacturing operations in Asia — and hobbling the country’s efforts to be the engine of growth in Asia’s hard times.