SE Asian monies post strong gains against yen

SE Asian monies post strong gains against yen

SINGAPORE (AFP): The currencies of Southeast Asian economies have posted strong gains against the yen, making it cheaper for them to service Japanese debt and import key components to fuel industrial growth.

But Japanese investments in the export-driven region could drop if the yen weakness persists, analysts warn.

The yen has for long been seen as an expensive currency in Southeast Asia, which sources most of its machinery imports from Japan to stoke manufacturing growth. Much of the region's debt is also yen-denominated.

While the U.S. dollar had been appreciating rapidly against the yen and many Southeast Asian currencies, the Japanese unit was losing steam against the regional currencies, analysts said.

"The yen has weakened against most Southeast Asian currencies. The ramifications of the movement of the regional currencies against the yen may be greater than that against the U.S. dollar," Jacqueline Ong, analyst with British financial consultancy I.D.E.A., told AFP.

Ong said that since June last year, the Malaysian ringgit had appreciated 14.48 percent against the yen, the Philippine peso added 12.8 percent, the Singapore dollar gained 10.79 percent, the Thai baht risen 10.51 percent and the Indonesian rupiah appreciated 9.7 percent.

The US dollar, meanwhile, posted a 13.43-percent rise against the yen during the same period. It was trading at about 122 yen on Wednesday.

Against Southeast Asian currencies, the greenback has climbed 1.9 percent against the rupiah, 0.2 percent against the peso, 1.2 percent against the baht and 2.6 percent against the Singapore dollar but declined 2.1 percent against the Malaysian ringgit so far this year, studies by NatWest Markets here showed.

"Considering the fact that Japan is the main provider of regional imports and much of the region's debt is yen- denominated, the yen's weakness will be to Southeast Asia's advantage," Ong said.

The Association of Southeast Asian Nations (ASEAN) accounts for about 16 percent of Japan's trade while Japan accounts for about 19 percent of the seven-member grouping's total trade, officials said.

Most of ASEAN, comprising Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, import intermediate and capital goods for the manufacturing sector in line with the region's export-oriented economic growth policy, they said.

Yen-denominated debt as a percentage of gross national product was, according to 1995 World Bank figures, about 28 percent for Indonesia, 23 percent for the Philippines, 20 percent for Thailand and 14 percent for Malaysia.

Andy Tan, general manager of U.S. finance house MMS International in Singapore, warned that a sustained weakness in the yen could slow down Japanese investment flows into the region and enhance the value of US-dollar-denominated debt.

"On the flipside, a sustained weakness in the yen may slow down Japanese investments in Southeast Asia although I don't think the yen weakness will be sustained," Tan said.

Japan's direct investments in ASEAN totaled $5.13 billion in 1994.

A bulk of the direct investments were from Japanese companies which relocated their production facilities offshore to escape from the rapid yen rise previously, Tan said.

He predicted that the "topside" for the US dollar could be limited to 130 yen in 1997 unless the Japanese economy declined further.

"The Japanese economy is already showing signs of recovery. At the same time, I suspect the U.S. itself wouldn't want the greenback to rise excessively from current levels against the yen as it could lead to potential bilateral trade problems," he said.