January 1, 2010｜Northeast Asia in General
Director and General Manager, Research Department, Hokuriku AJEC (Around Japan sea Economic exchange Conference)
Three months have passed since the Democratic Party of Japan administration came into being, and changes have appeared which had never been experienced before during the time of the long-running Liberal Democratic Party administration. With the administrations switching, the repudiating of the measures taken by the previous administration became possible, and I think it is through this that the changes are appearing. The government furthermore, with the administration switching, was able to alter past policy, and the changes were not restricted to the political sphere but extended to government bodies in general. Regarding the political changes which are occurring currently in Japan, however, the stringency is being more strongly felt in provincial areas, such as the curtailment of public-works projects.
Talking of change, the international situation enveloping Japan has also changed drastically. It is just bewildering as to why the changes in the exchange rates after the Lehman shock of September 2008 have been so hard for Japan. Taking the end of August 2008, immediately prior to the Lehman shock, as 100, I tried plotting how principal currencies have been changing in relation to the Japanese yen. The Japanese yen equals 100. What becomes clear from this point in time is the unequaled appreciation of the yen. Through the ongoing depreciation of the US dollar, from July 2008 the Chinese yuan, which has continued to be dollar-pegged, was automatically devalued, and the various currencies of Asia gave the impression of being in a devaluation race induced by this. The ROK won, which is a direct threat to Japanese exports, devalued on a basis above the Chinese yuan, and the central bank of the ROK, in order to check the appreciation of the won moved to buy dollars, with a resulting situation where the ROK’s foreign currency reserves are increasing. While the change in course of policy management from the dependence on external demand to the expansion of domestic demand due to the correction of distortions in the global economy has been claimed, except for nations with large populations, such as China, India and Indonesia, also being developing nations where growth in internal demand holds promise, how to bring in external demand in order to break away from the Lehman shock and get on track to economic recovery is key, and in ignoring external demand, etc., they cannot avoid the criticism that they are unaware of the economic realities. In that sense, with no intervention at all in foreign exchange, the responses of the Japanese government which have permitted the unequaled appreciation of the yen are not without their problems. As things are, the flight overseas of industry will again intensify, with the hollowing-out of industry potentially bringing a worrying situation, and a constitutional weakening like that in the US economy, which is seen as the root cause of the current global imbalance, is feared. In addition in the case of Japan, it has harsher conditions than the United States of population decrease and an ageing population.
In the current economy of Japan the lack of demand stands out, with terms such as a 70- or 80-percent economy flying around, and companies remaining in this state without doing anything will be driven into a corner. I think that regional companies will be forced to face countermeasures. Then again, phrases such as the Japanese economy developing a “Galapagos syndrome” appear frequently in the mass media, and this is probably a reflection of the sense of crisis which is widening in the economic realm also, looking at Japanese companies which are quite immobile. For the Japanese regions on the Sea of Japan, the ties with the neighboring countries of Asia are stronger than those of other regions. For the regional business world too, regarding handling the new changes in the situation, a turnaround in awareness greater than that to date is called for, while keeping watch on the lie of the land in the countries of Asia in particular. However, when expanding overseas and doing business with other countries, because there is also risk, measured responses are necessary. While we too at Hokuriku AJEC would like to give as much support as possible, there should be no hesitation in benefitting from the expertise of all the parties concerned, including national organizations such as JETRO. We only hope of regional firms that they do their utmost.
[Translated by ERINA]