Re: "1. The prolonged and intractable Japanese recession"
Story Filed: Sunday, February 28, 1999 11:13 PM EST
By Chen Hegao
MANILA (March 1) XINHUA - The worst of the Asian financial crisis is over, and the regional economy is starting to pick up -- this is the conclusion of many surveys conducted recently by news and economic organizations, although some economists may disagree.
But believe it or not, more and more signs indicate that the 21-month-old crisis has reached a bottom point and is starting to turn around.
And this conclusion is backed by the performance of the region's relatively stable market in this year. Despite the launch of the euro and a financial crisis in Brazil at the beginning of 1999, Asia's financial market recovered very soon after several days' ups and downs.
Moreover, the recent fall of the Japanese yen failed to shake the Asian currencies. In the past week, the Japanese government reversed itself and let the yen fall to help weather a worst post-war recession. The yen depreciated from around 110 against the U.S. dollar to 122, the lowest in the last three months.
Although Asian currencies have remained hostage to the Japanese yen, their fall has been kept in a normal range, and the foreign currency market in the region has not seen a big tumble as it did a year ago.
While the regional market is becoming immune to outside influence, Asia has reached one of the most important milestones on the way to recovery: the current account surplus in some countries has begun to decline.
Economists said that a reduction in the current account surplus indicates that domestic demand in Asian countries has revived and that could stimulate production and imports.
In South Korea, with the consumption demand rising, imports rose by 15.4 percent in January. As a result, South Korea expects to halve its current account surplus to about 20 billion U.S. dollars this year from 40 billion dollars last year.
In Thailand, imports increased 1.6 percent in January, reflecting the start of economic expansion.
Another positive indication of recovery is the increasing foreign exchange reserves in Asian countries. In the past two months, Asian countries, especially those severely hit by the crisis, increased their foreign exchange reserves through the purchase of dollars from the spot market, issuance of global bonds and borrowing from international financial institutions.
In the Philippines, the government floated 1.2 billion dollars worth of global bonds and bought over 40 million dollars from the foreign exchange market in the new year. Its foreign exchange reserves soared to 12 billion dollars by the end of February, an equivalent of four months of imports.
South Korea's foreign exchange reserves rose to 52.5 billion dollars as of January 15, up from 52.04 billion dollars at the end of last December. In Thailand, foreign exchange reserves also climbed to 29 billion dollars.
With their foreign exchange reserves returning to the pre-crisis levels, Asian countries have enhanced their capability of settling short-term foreign debts and increasing imports, analysts said.
As an engine of economic development in Asia, the region's exports are also seeing a turnaround. There are signs that the crushing drops in consumption in crisis-struck Asian countries are slowing and even reversing.
Across the region, businesses have stopped cutting their purchases, retail sales for some categories of goods appear to have bottomed out. Stabilizing domestic demand is a crucial step on Asia's road to recovery, economists said.
As the Asian crisis eases, economists have become more and more optimistic about Asia's recovery. At the end of last year, many economists predicted that Southeast Asian and South Korean economies would continue to see negative growth in 1999.
But now, many of them believe that except Indonesia, other crisis-hit countries are expected to register a 1 percent to 3.5 percent growth this year.
Economists of the International Monetary Fund and the Asian Development Bank declared recently that the Asian crisis has reached the bottom and the worst is over.
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