Japan wonders if Asian investment backfired<\/p>\n
By Miwa Suzuki<\/p>\n
TOKYO (AFP): An extensive network of factories and joint
\nventures in Southeast Asia makes it very difficult for Japan to
\nreduce its exposure to the regional financial crisis, analysts
\nsay.<\/p>\n
Unlike the United States, which has much of its money in
\nliquid securities, Japanese corporates are bracing for the long-
\nhaul impact as Thailand, Indonesia, Malaysia and others extricate
\nthemselves from crisis.<\/p>\n
\"Active direct investment by Japanese companies in Asia could
\nweigh against them if economic recovery there is delayed,\" said
\nMasayuki Kichikawa, senior researcher at Nomura Research
\nInstitute.<\/p>\n
\"They cannot easily flee like securities investors,\" he said.<\/p>\n
The OECD said last Friday the Southeast Asian crisis,
\ntriggered by the flotation of the Thai baht on July 2, would cut
\neconomic growth in even the major industrialized countries from
\nearlier forecasts, with Japanese growth disproportionately lower.<\/p>\n
The crisis is expected to shave 0.1-to-0.2 percentage points
\noff growth rates in the European Union and the United States this
\nyear, \"twice that in Japan,\" the Organization for Economic
\nCooperation and Development's (OECD) chief economist, Ignazio
\nVisco, told a news conference in Paris.<\/p>\n
The OECD had forecast in June that Japan's gross domestic
\nproduct (GDP) would grow 2.3 percent in 1997, and 2.9 percent for
\n1998.<\/p>\n
That was before the Thai crisis.<\/p>\n
Japanese car giant Toyota Motor Corp. said recently it would
\nhalt production lines at its two main plants in Thailand, putting
\nthousands of workers on to other duties at minimum pay, as it
\njoined a growing band of auto makers hit by the sharp economic
\ndownturn in that country.<\/p>\n
Capital flows to Asia totaled US$156.8 billion in 1996,
\naccording to Nomura Research Institute, based on data from the
\nInternational Monetary Fund, the Bank of Japan and the US
\nCommerce Department.<\/p>\n
The 1996 figure was 1.6 times that of 1993 and 3.6 times that
\nof 1990.<\/p>\n
Japan and the United States accounted for about a quarter each
\nof the total capital flows to Asia between 1990 and 1996, but
\nJapanese investment was noticeably focused on direct investment.
\nThat accounted for half of Japanese capital flows to the Asian
\nregion in 1996, with securities investment coming to 36.4
\npercent, and loans, deposits and other forms of investment to
\n13.5 percent.<\/p>\n
On the other hand, 45.2 percent of U.S. investment was in
\nsecurities -- direct investment accounted for 22.0 percent, with
\nother forms at 32.8 percent.<\/p>\n
\"It may take one or two years for Asia to come out of its bad
\ndebt problems and political confusion, but (Japanese) companies
\ncan still reap big profits there in the medium-term period,\"
\nKichikawa noted.<\/p>\n
\"Japanese companies may face the need for withdrawal, or plant
\nshutdowns in the worst case,\" he said, but he added that the
\ngloomiest scenario was \"unrealistic\" at this stage.<\/p>\n
Shigeki Higashi, researcher at Asian Economies Research
\nInstitute, said: \"It is the long-term strategy of Japanese
\ncompanies to build production bases in the region.<\/p>\n
\"Lower demand may hit the Japanese firms over a short period
\nof time but they would benefit in the long term,\" Higashi said.<\/p>\n
As the yen shot up to all-time highs against the dollar in
\n1995, seriously eroding competitiveness, Japanese companies
\nearnestly pushed factory construction and other direct investment
\nin Asia.<\/p>\n
According to figures from Thailand's central bank, Japanese
\nnet direct investment in the country came to 13.8 billion baht
\n($363 million) in 1995, far surpassing 6.5 billion baht by the
\nUnited States.<\/p>\n
Masaki Shiroyama, researcher at Nikko Research Center, said
\nU.S. investment focused on financial sectors, largely because
\nU.S. firms were latecomers in setting up manufacturing bases in
\nAsia.<\/p>\n
But luck now will depend on which manufacturing sector
\ncompanies are operating in, he said.<\/p>\n
\"Automakers and some other Japanese manufacturers that aim at
\nsales in Asia will suffer more than others, such as electrical
\nmachinery makers which export products for European and U.S.
\nconsumption,\" Shiroyama said.<\/p>",
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