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NO. 8 — February 27, 1998

 

Feature Article

JAPAN AND THE ASIAN ECONOMIC CRISIS: PART OF THE SOLUTION OR PART OF THE PROBLEM? by Douglas Ostrom

Summary

The economic difficulties that erupted last summer in a number of Asian nations raise a variety of questions regarding Japan. Not a few analysts have suggested that the country home to Asia's largest economy is to blame for the crisis — either because it provided a dysfunctional economic model or because Japanese actions, both public and private, contributed directly to the troubles confronting its neighbors. Given the fears that Asia's problems will leapfrog the Pacific, this argument could add to the criticism of Japan in the United States.

Other analysts worry that the Japanese economy will be adversely affected by developments in Asia, even if it bears little responsibility for creating them. In this view, the Asian crisis potentially will spill over to the United States, perhaps directly through this country's relationships with nations in the region or possibly indirectly as a result of U.S. trade relations with Japan.

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Weekly Review

JAPAN MOVES QUICKLY ON BANK RECAPITALIZATION PLAN by Douglas Ostrom

Japan's strategy of using public funds to trigger the rehabilitation of its banking system continues on a remarkably fast track. Little more than a vague idea last December, plans now call for banks to get significant funds by March 31, the end of the fiscal year. The Diet took a major step in this direction February 16 when the upper house joined the lower house in approving two measures that could direct as much as ¥30 trillion ($250 billion at ¥120=$1.00) to a wide variety of banks.

 

FOUR ECONOMIC PACKAGES IN FIVE MONTHS FAIL TO RELIEVE DOUBTS by Jon Choy

On February 20, Prime Minister Ryutaro Hashimoto and his ruling Liberal Democratic Party announced their fourth set of measures since last October aimed at stimulating the economy or curing its ills. They received yet another tepid response from financial markets, business leaders and foreign governments.

 

JAPAN ENCOUNTERS STRONG CRITICISM AT G-7 MEETING by Eric Altbach

At their February 21 meeting in London, finance ministers and central bank chiefs from the Group of Seven industrial nations challenged Tokyo to do more to stimulate the economy and help spur recovery in the economies of Asian neighbors. The assembled officials characterized Japan's economic outlook as "weak" and said that the government should enact additional tax cuts and expand public works spending in order to boost demand. However, the Japanese participants resisted the pressure for new pump-priming measures, asserting that already announced efforts, including a package released February 20 (see previous article), must be given time to take effect.

 

HASHIMOTO POLICY ADDRESS SHORT ON SPECIFICS by Barbara Wanner

Prime Minister Ryutaro Hashimoto neither surprised nor dazzled most observers with his February 16 policy address to the Diet. It seemed aimed only at providing a general outline of domestic and foreign policies rather than offering specific steps to achieve stated goals. On the nation's long-stalled economy, in particular, the Japanese leader simply reiterated his resolve to boost activity while at the same time reducing the government's burgeoning debt. Similarly, Mr. Hashimoto stressed that the U.S.-Japan alliance and relations with Russia and the People's Republic of China are key to peace and stability in the Asian Pacific region, but he did not propose how to resolve current problems impeding diplomatic progress, particularly via-a-vis Moscow. About the only subject on which the prime minister was specific was the need to address problems in precollegiate education, as evidenced by the alarmingly high suicide rate among teenagers and increased violence in schools.

 

Notes:

The botched February 21 mission of Japan's all-domestic H-II heavy-lift satellite booster has costs beyond the immediate financial and technical losses of a disabled communications/broadcasting technology experiment satellite. The failure, the first in the H-II's six launches since 1994, also could place in jeopardy the nation's chances of becoming a mainstream player in the crowded international commercial satellite launch market.

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