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NO. 28 &emdash; July 25, 1997

 

Feature Article

JAPAN'S FOREIGN DIRECT INVESTMENT AND CHANGES IN IMPORT STRUCTURE by Douglas Ostrom

The internalization advantages that have spawned networks among Japanese suppliers producing outside Japan and their ownership of advanced technology would appear to offer these firms a chance to play an overwhelming role in serving home markets from overseas facilities. To date, however, corporate Japan's foreign factories have been only moderately important in the rise of the nation's manufactured imports. Recent evidence suggests, moreover, that their future role may be smaller. That could pave the way for foreign competitors to be bigger suppliers of Japan's rising demand for imported consumer durables and nondurables, capital goods and other manufactures.

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Weekly Review

Japan's Trade Surplus Surged In Spring by Douglas Ostrom

The long string of consecutive quarterly reductions in Japan's huge trade surplus ended ironically at 13. Following a 17.6 percent year-to-year contraction in the January-March period, the imbalance measured in yen shot up a whopping 94.3 percent in the spring. To the extent that the turnaround was inevitable given the delayed reaction of both exports and imports to past exchange rate changes, further increases in the surplus can be expected in coming months. To a degree, however, the April-June surge in the closely watched trade bottom line was something of an aberration because of such extraordinary factors as the April 1 boost in the consumption tax.

 

Initial Offers Boost Chances For WTO Financial Services Pact by Jon Choy

The United States, Japan, Canada and the European Union, along with nine other governments, have tabled initial lists of measures to open more fully their respective financial markets to international competition. Those mid-July offers gave a big boost to talks aimed at producing a World Trade Organization deal liberalizing domestic financial market rules around the globe.

 

Japan Prepared To Help Struggling Thailand by Eric Altbach

Both the Japanese government and financial institutions have promised to help Thailand recover from the currency crisis that forced officials in Bangkok to allow the baht to float July 2. In meetings in Tokyo July 17 and 18 Thai Finance Minister Thanong Bidaya obtained a pledge from his counterpart, Hiroshi Mitsuzuka, that Japan would intervene to help support the Thai currency at Bangkok's request. Mr. Thanong also met with Japanese business leaders, including top executives of the 21 banks with operations in Thailand. While details of the meeting were not disclosed, the banks have said that they will continue normal business operations in Thailand and maintain lines of credit to companies there. That support is critical. Japan is Thailand's largest lender. It also is the Southeast Asian country's biggest trading partner and foreign investor.

 

JDA Report Warns Of Regional Instability, Urges Emergency Legislation by Barbara Wanner

Previewing some of the government's arguments later this year for legislation enabling expanded U.S.-Japan defense cooperation, the Japan Defense Agency in its 1997 white paper maintained that such measures are necessary to deal with post-Cold War instability and uncertainty in the Asian Pacific region. The JDA document, released July 15, pointed in particular to the People's Republic of China and North Korea as potential perpetrators of regional unrest. Echoing a major theme of previous annual security reviews, JDA emphasized that the U.S. military presence in the region plays a crucial role in discouraging military adventurism by Beijing, Pyongyang and other Asian actors. Within this context, the U.S.-Japan Mutual Security Treaty remains "indispensable" for ensuring peace around the Japanese archipelago, the authors of the defense white paper stressed.

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