Japan riddle haunts Asia-Pacific<\/p>\n
By S. P. SETH<\/p>\n
SYDNEY (JP): According to reports, Japan's economy has turned
\nthe corner. For the year ending March 1996, its Gross Domestic
\nProduct (GDP) is estimated to have risen by about 2.5 percent:
\nthe best results since 1991. Indeed, its 3 percent economic
\ngrowth in the last quarter (January-March) of the financial year
\nwould point to a much higher annual economic growth, if
\nsustained. But financial analysts are not betting on it. Even a
\nsustained annualized growth rate of 2.5 or 3 percent is being
\ntreated with some caution. That is because much of Japan's
\neconomic growth is due to heavy government spending (totaling
\n$US130 billion) on public works projects, which is unlikely to
\ncontinue.<\/p>\n
The contrast in public spending between 1991 and recent times
\nillustrates this point. In 1991, Japan had a budget surplus
\nequivalent to 3 percent of its GDP. Today, it has a budget
\ndeficit approaching 6 percent of its GDP, which would suggest
\nthat the government might have to rein in public spending.
\nBesides, it looks as if interest rates will be rising soon.
\nAlthough the country's central bank has helped jump-start the
\neconomy through record-low interest rates, this cannot continue
\nfor fear of fueling inflation.<\/p>\n
Yet lately, profits are up, consumer spending is on the rise,
\nprivate capital outlays are healthy and the yen appears stable
\nwith U.S. dollar, at about 105-110 yen to a dollar.<\/p>\n
The celebrations, however, are muted because of doubts about
\nthe sustainability of Japan's economic growth, from a likely fall
\nin public spending and a rise in interest rates, lack of
\npolitical will to continue with economic deregulation and general
\npolitical uncertainty in the country, with its changing coalition
\ngovernments. It remains to be seen if next year's elections will
\nresolve this problem. The country's political culture of fixing
\nup deals remains unchanged.<\/p>\n
However, to the extent that Japan is emerging from its
\neconomic wilderness, it is beneficial for the world economy. The
\nJapanese economy is an important engine of world economic growth.
\nIn order to stage a comeback, Japan has been undergoing
\nsignificant economic restructuring. This, among other things, has
\ninvolved a shift of its low and medium level manufacturing to
\ncountries in Southeast and East Asia.<\/p>\n
Japan is estimated to have already invested about $85 billion
\nin Asia, and is adding to it by over $10 billion every year. Its
\ntrade with Asia has overtaken its combined trade with the
\nEuropean Union and the United States. Japan's trade surplus with
\nAsia is burgeoning, accounted for by exports of machinery and
\nparts to Japanese manufacturing units in these countries. (Some
\nanalysts, though, believe that eventually, growing Japanese
\nimports of manufactures from Asia will wipe out this surplus. But
\nthat is in the indeterminate future)<\/p>\n
These developments have a negative side as well. For
\ninstance, Southeast and East Asia, in effect, have become part of
\nJapan's Greater East Asia Co-Prosperity Sphere, which Tokyo did
\nmuch to foster before and during World War II. Even though it is
\nhappening now in peacetime and with the willing participation of
\nthe concerned Asian countries, it is still causing considerable
\nstrain and tensions. As Sumie Kawakami, an analyst on Japan, has
\npointed out: \"The use of Asia as an assembly base for Japanese
\nproducts is beginning to result in friction, as it becomes
\nobvious that Japanese companies are reluctant to shift management
\nresponsibilities to non-Japanese.\"<\/p>\n
The tensions are also inherent in a relationship where Japan
\nis unwilling to establish high-technology operations in Asia,
\nthereby seeking to perpetuate an unequal economic relationship.
\nEven though Japanese investments in Asia are creating economic
\nopportunities and prosperity, the resultant status of an economic
\nappendage or satellite of Japan is not a very pleasing prospect
\nfor regional countries.<\/p>\n
Therefore, while Japan is seeking to create an inter-
\ndependent economic relationship with its Asian neighbors, there
\nis no corresponding attitudinal change in terms of regarding
\nthese countries as its equal partners. Japan's old wartime
\nattitude of regarding them as its economic subsidiaries\/colonies
\nis still very much alive. Japan's growing trade surplus with Asia
\nyear by year is a constant reminder of it. Unless corrected soon,
\nthis might become a serious issue between Japan and its Asian
\ntrading partners.<\/p>\n
At another level, Japan's economic expansion in the region
\nis likely to create new tensions in U.S.-Japan relations. Japan
\nis increasingly replacing the United States as Asia's preeminent
\neconomic power. At the present time, however, the U.S. and Japan
\nare enjoying a honeymoon in their security partnership against a
\nperceived Chinese threat to regional security. There are too many
\nimponderables to warrant any long-term predictions in this
\nregard. For instance, trade tensions between the two countries
\nare still largely unresolved.<\/p>\n
Even within Japan, its economic recovery is a mixed
\nblessing. Economic restructuring is causing considerable pain.
\nThe shift of manufacturing abroad, mostly to Asia, is adding to
\nunemployment at home. Job security and seniority are no longer
\nassured. Many businesses have trimmed their operations by sacking
\nworkers to remain competitive. Japan is in the midst of record
\nunemployment, reaching around 3.5 percent. The real unemployment
\nfigure (including \"discouraged workers\" who have stopped looking
\nfor work) is much higher -- at about 9 percent -- according to
\nKishi Nohubito, a Japanese scholar. Such changes are bound to
\naffect Japan's social harmony and stability.<\/p>\n
How Japan will cope with pressures at home resulting from
\ngrowing unemployment and criticism abroad of Japanese insularity
\nand arrogance will significantly affect the strategic environment
\nin the Asia-Pacific. For instance, if Japan were to once again
\nfeel besieged, as it did in the 1930s, one can only predict
\ndisaster in the Pacific during the next century.<\/p>",
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