TI's economist on Japan Inc......................
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Story posted at 6 p.m. EST/3 p.m. PST, 1/5/98
TI economist worries about Japan
By J. Robert Lineback
PEBBLE BEACH, Calif. -- While South Korea's financial crisis has
grabbed headlines in recent weeks, chip makers and capital equipment
suppliers should pay close attention to events in Japan, which have the
potential of triggering recessions in now-healthy United States and Europe,
warned the chief economist of Texas Instruments Inc. here today during an
executive conference.
By far, the biggest risk to semiconductor growth forecasts in 1998 is that
Japan could pull the United States and Europe into recessions, said Vladi
Catto, TI's vice president and chief economist, during a presentation before
the Industry Strategy Symposium hosted by the Semiconductor Equipment
and Materials International (SEMI) trade group. That risk could be averted
if the Japanese government were to act decisively to simulate its ailing
economy with tax cuts and other moves aimed at ending country's persistent
recession, Catto added.
Catto cautioned that a potential trade war could erupt between Japan and
other regions--especially the United States and Europe--if the value of the
yen slips to 150-180 per $1. A weaker yen would make Japanese products
much cheaper in the U.S. and European markets, undermining local
suppliers.
The TI economist predicted there was a 25% risk factor that the U.S.
economy could be negatively impacted by Japan's problems. Overall,
Japan's gross domestic product will grow by only 0.9% in 1998 after
increasing an anemic 0.4% in 1997, predicted Catto.
Because TI was in a "quiet period" prior to releasing its 1997 financial results
later this month, Catto would not release his specific semiconductor forecast
during the SEMI conference. However, he hinted that the current outlook
for chip market growth was generally higher than it was in 1997, when TI
estimated that industry revenues increased by only 5%, based sales in U.S.
dollars, and about 8%, based on local currencies.
Catto said Asia--battered by currency devaluations and economic
turmoil--still looks like a bright spot for growth in 1998 for three reasons.
First, he said, China has avoided the brunt of the region's economic crisis,
which has hit hard in Korea, Thailand, Malaysia and Indonesia. Second,
Catto said, the currency devaluations "has established the basis for the
recovery [making the region more competitive in costs], assuming there
won't be a recession in the United States." And third, he added, the
fundamentals are still in place for growth in the Asia-Pacific region--namely
high savings rates, open markets, emphasis on education and entrepreneurial
cultures.
Even with the economic crisis swirling around the region, Asia's GDP growth
is expected to be at 6.0% in 1998, more than twice that of North America
and Europe, Catto said.
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