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![]() Friday, June 12, 1998 Published at 21:36 GMT 22:36 UK ![]() ![]() Business: The Economy ![]() Japanese woes make markets suffer ![]() Red number day ![]() Now that it is official that Japan's economy is in recession, the rest of Asia is facing the prospect of a second currency crisis. Currently, it is the poor performance of the Japanese yen which is to blame for much of the financial turmoil. On Friday it dropped to a near-eight year low trading at 144.72 against the dollar. Financial markets are taking note. The currencies of emerging markets take a hammering, economies contract and around the world investors shy away from buying stocks as the global impact of the crisis is far from certain. Oil producers are already feeling the pain. The crisis in Asia has caused a slump in demand for oil. On Friday, Opec countries had to watch in disbelief when oil prices slipped below $13 per barrel. Saudi Arabia, Venezuela and Mexico had attempted to shore up prices with production cuts, but the oil markets are not reacting. The financial markets
Ironically, the only market spared a hammering on Friday was Tokyo. The announcement that Japan was in recession came after the stock market had closed. Nonetheless, during trading the market's main index, the Nikkei, breached the key 15,000 points barrier, although it ended the day marginally up by 8 points at 15,022.33.
Korea
Philippines
London
New York
Malaysia
This is the country where the dire state of Asia's financial markets first became apparent, and both Thai shares and its currency, the baht, continue to fall. The Bangkok's SET index lost 1.6% - having lost 25% since the start of the year.
Indonesia
Other markets
There have been calls for the G7, the leading industrialised countries in the world, to intervene. However, this is unlikely to be forthcoming. The United States Treasury Secretary, Robert Rubin, said on Thursday that intervention could be only a mere short-term instrument and that the yen weakness was reflecting economic conditions in Japan. The markets have taken note. Tony Norfield, chief economist at ABN-Amro in London, said Rubin was "letting Japan hang out to dry until they come up with something substantial to turn the economy around." Many economists believe that it is only a matter of time before the dollar will brake through ¥145 to the dollar. Some predict that at the end of the year Japan's currency could trade at ¥160. Analysts stress that the crisis is not an Asian problem. The falls on Wall Street are "a strong warning that Japan's problems cannot be ignored," said Paul Meggyesi, senior currency economist at Deutsche Bank. And for Europe there is only one hope: traders report that business is light because of football's World Cup in France. Let's hope that matches are gripping when Asia's markets go haywire again.
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