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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: chirodoc who wrote (566)	12/12/1997 8:01:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 3902

Deepening South Korean crisis to hurt Japan 11:36 a.m. Dec 12, 1997 Eastern By Kanta Watanabe TOKYO, Dec 12 (Reuters) - The deepening economic crisis in South Korea could deal a severe blow to Japan's manufacturing and financial sectors, economists in Tokyo said on Friday. Japanese manufacturers are expected to suffer a double punch of a slowdown in their exports to South Korea, Japan's second-largest export market after the United States, and also stiffer competition for overseas markets following the Korean currency's freefall. Meanwhile, Japanese banks, already suffering from huge non-performing loans at home, are facing more risks on their exposure to South Korea, economists said. In the past, a pick-up in Korean exports was accompanied by a surge in Japanese exports of capital goods to South Korea, due to Korean manufacturers' heavy dependence on imported Japanese manufacturing equipment. But that is unlikely to be the scenario this time, as Korean manufacturers have plenty of idle capacity within their existing facilities after hefty capital spendings in 1994 and 1995, economists said. ''Due to a credit crunch and a slowdown in domestic demand, one cannot expect big capital spendings by Korean firms. So Japanese exports of capital goods to South Korea are likely to slow down,'' said Shunta Yamato, senior analyst of the international research department at Daiwa Institute of Research Ltd. Japan's exports to South Korea in the first half of this fiscal year ending in March 1998 totalled 1.59 trillion yen, accounting for about six percent of its total exports and about 15 percent of its exports to Asia. Some Japanese manufacturers could also face tougher competition with their Korean rivals due to the won's depreciation against the U.S. dollar, which make Korean imports cheaper. So far this year the won has lost 55 percent of its value against the greenback. ''In certain sectors, such as steel, shipbuilding and semiconductors, Japanese companies could face tougher competition with Korean makers due to the won's sharp fall,'' said Daiwa Institute's Yamato. The won closed at 1,710 to the dollar on Friday, after opening at another record low of 1,891.4, compared with Thursday's close of 1,719.8. Susumu Takahashi, general manager at Japan Research Institute, said although Japanese banks' exposure to South Korea was not so high compared with that of other Asian nations, they may still be vulnerable to the mounting financial problems in South Korea. This is because about 60 percent of Japanese banks' lending in Korea has been concentrated in the banking sector. ''What's happening in South Korea is crisis in the financial sector, and the concern is that Japanese banks have a big exposure to that sector,'' Takahashi added. Non-performing loans held by South Korea's commercial banks totalled 28.53 trillion won at the end of September, up from 14 trillion won at the end of 1996, Seoul's Finance Ministry said last month. Japanese banks had the biggest exposure by a single country to South Korea as of the end of 1996, with their loans to the country totalling $24.3 billion, according to the Bank for International Settlements (BIS). South Korean Finance Minister Lim Chang-yuel said on Thursday that Japanese banks have withdrawn $9 billion in short-term lending this year. ''If Japanese banks cooperate with rolling over debt we won't need any more money (from the International Monetary Fund),'' Lim said. Financial market sources in Tokyo said Lim may be asking Japanese banks to roll over short-term debts because European banks have already withdrawn most of their loans. According to the BIS data, European banks' exposure to South Korea totalled $33.8 billion at end-1996. But market sources said most of these loans may have been withdrawn by this autumn. ((Tokyo Treasury Desk +81-3 3432-9780