| Japan accounts for 64 per cent of
Asia's output and absorbs about 12 per cent of Asia's
exports. It is a key source of capital investments and
loan financing for Asia. After last year's package of
counter-cyclical policy measures, the Japan Economic
Planning Agency (EPA) has estimated that with sufficient
stimulus, real GDP growth of 0.5 per cent in FY1999-2000
should be achievable. The Diet has passed a stimulatory
budget worth 82 trillion yen for the coming fiscal year.
If the Japanese economy recovers as expected by the
EPA, it can be the locomotive to pull Asia out of its
slump. However, the chances are that economic stagnation
will continue for some time. Competitive pressures may
undercut export earnings. Rising bond yields have raised
long-term borrowing costs, while over-capacity in the
manufacturing sector is dragging down profits. Consumer
and business sentiments are bearish, weighed down by
bankruptcies and high levels of unemployment. These
factors make prospects for a near term recovery very
uncertain. |
