Messages from Monthly Keidanren, May 1998

The Asian Crisis and Japan


Vice Chairman, Keidanren

Advisor, The Sakura Bank, Ltd.

Asia's status as the "world's growth center" has been severely shaken. The currency and financial crisis that began in Thailand in July 1997 spread first to other ASEAN members and then to the NIEs. Thailand and South Korea, together with Indonesia, which is experiencing the greatest difficulties at present, were so severely affected that they have required financial assistance. These countries are currently making determined efforts to put their economies back on track through IMF initiatives.

The Keidanren has received visits from many of our Asian neighbors in 1998, and we have held meetings to ascertain the situation in Asian countries. The responses to our questions have invariably provided poignant insights into the current problems.

As suggested by many experts, Asia's present economic crisis can probably be attributed to an imbalance between economic growth and the development of economic structures. However, deeper reflection indicates that there are also underlying issues specific to each nation. This view has been reinforced by conversations with our neighbors, and by reports from various Asian countries.

Asia's growth performance in the past has been likened to the flying formations of wild geese. While individual economies were at different growth stages, all seemed to be moving in the same direction. It now appears that the situation was not so uniform.

In a previous column I emphasized the importance of Japan's relationship with Asia to the world economy. I also called for the perspective of Japan's position in Asia to be added to Japan's national coordinates. This view has been further strengthened as I observe the harsh circumstances of the Asian economies in recent times. Japan obviously needs to provide direct assistance to the countries concerned without delay. More than this, however, Asian countries are calling for long-term structural help, geared toward their particular circumstances, with their efforts to implement economic reform. We are frequently frustrated by our inability to respond adequately to these needs, in part because Japan is itself experiencing extreme discomfort between the rock of prolonged recession and the hard place of structural reform. However, it seems to me that a more fundamental task for Japan is to break out of its present difficulties and regenerate itself with determination and a strong awareness of its own role.

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