Asia could kick off global meltdown: Economists

Asia could kick off global meltdown: Economists

SINGAPORE (Reuters): Asia's economic crises could result in a
global recession as early as next year if Japan does not recover,
economists at the East Asia Economic Summit said on Monday.

They said that while Asia's fundamentals were strong -- stable
macro-economics, emphasis on skill upgrading, strong
infrastructure and high savings rates -- the region's recovery
was locked to Japan's.

"We are at a critical juncture," Kenneth Courtis, chief
economist and strategist at Deutsche Bank Group Asia Pacific,
Japan told the summit conference, sponsored by the Geneva-based
World Economic Forum (WEF).

"In sector after sector, we have major problems brewing...All
sectors have excess supplies," Courtis said.

"I think the biggest risk is Japan. If it doesn't get its act
together, Japan will become the Titanic that pulls the rest of
Asia along with it," Courtis said.

Courtis said as the world's second largest economy, an ailing
Japan which was contracting at a three to four percent rate could
result in a global meltdown.

"It is the world's leading savings nation, the world's biggest
creditor. If it goes into financial implosion then it becomes
very difficult to see how we can avoid a global meltdown,"
Courtis said.

"There is no way to stabilize Asia without stabilizing Japan
and there's no way to stabilize the world's economy without
stabilizing Asia," he said.

In order to stabilize Japan, especially its beleaguered
banking sector, the government needed to recapitalize all its
banks, ailing or otherwise, immediately, Richard Koo, chief
economist at Japan's Nomura Research Institute said.

Koo said the Japanese government did not have the time to
select the good or the bad banks for recapitalizing as this would
take up to five years, and the economy did not have that much
time.

Some officials felt Asia's high savings rate and export-led
growth focus could be detrimental in the face of a global
economic slowdown, notably in the United States.

"Every country is focussing on an export-led growth except
one. That is the United States who's buying," Clyde Prestowitz,
President of the Economic Strategy Institute in the United States
told the conference.

"We need demand consumption apart from the United States," he
said.

Prestowitz said if Japan remained ill, Asia recession worsens,
the U.S. stock market falls and U.S. consumption declined, a
global recession could hit as early as next year.

"The only way to pre-empt that pressure (for a global
meltdown) is to get growth in the global economy and that's going
to take about six months to get the machine going again," Courtis
said.

Ulrich Cartellieri, a board member of Deutscje Bank told the
meeting that Asian countries must move faster to restructure
their financial systems because there is a now a risk of the
region's crisis spilling over into the rest of the world.

"Financial restructuring is a battle against time and in this
battle, there are only two types of soldiers, the quick and the
dead," Cartellieri added.

"Unfortunately, the risk now is that the external environment
will deteriorate," he said. "Against this scenario the urgency to
get on with financial restructuring becomes even greater."

Cartellieri said the speed at which crisis-hit Asian countries
were restructuring their debt was "disappointing" and in fact,
their total debt had increased since the end of last year.