Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point
On Air
Low Graphics

Sunday, June 21, 1998 Published at 18:19 GMT 19:19 UK

Business: The Economy

World watches for Japanese recovery

Tokyo workers look for signs of economic recovery

Japan's economy is in a perilous state, prompting fears that the whole world could be dragged into the economic crisis that has overtaken South-East Asia.

Recession is making Japanese shoppers spend less and save more, creating a deflationary spiral that's been driving the Yen lower.

Economist Dr Ken Kurtis says this is the "last chance" for Japan
A nation once obsessed with gadgets and consumerism is simply not buying any more.

Dr Ken Kurtis, an economist who attended meetings of top financial officials in Tokyo at the weekend, says that this is the last chance for Japan to put its house in order.

Japan dominates

The region is dominated by Japan, the world's second-largest economy which must take the lead in any recovery. In three years, the Yen has fallen by more than 40%.

The crisis has its roots in US$500bn of bad debts held by Japanese banks.

[ image: A flood of cheap Chinese exports would cause economic turmoil in the West]
A flood of cheap Chinese exports would cause economic turmoil in the West
If the Yen keeps falling, China, whose spectacular economic growth is built on cheap exports, could be forced to join in.

This would risk flooding the west with cheap goods, threatening western companies and banks with bankruptcy and luring the dollar and the pound into the downward spiral.

In South Korea, trade unions are already protesting at soaring unemployment.

South Korea and its neighbours may also be forced to devalue to compete.

Noriko Hama of the Mitsubishi Research Institute says Japan's crisis could lead to competitve devaluations
Noriko Hama, of the Mitsubishi Research Institute, says this could trigger a competitive series of devaluation - of what she calls "currency wars".

At the 1997 Asia Pacific Economic Co-operation (Apec) summit in Vancouver, President Clinton and other regional leaders dismissed South-East Asia's economic trauma as a "glitch".

Now, in a major policy reversal, that glitch has been recognised as an international economic emergency.

[ image: Summers: Japan must move quickly]
Summers: Japan must move quickly
Saturday's meetings in Tokyo of top finance officials from around the world illustrated the gravity which the international community attaches to Japan's economic problems.

US Deputy Treasury Secretary, Lawrence Summers, said it was important Japan took the "window of opportunity" that the meetings offered to quickly implement plans to improve its economic prospects.

Billions spent

On Wednesday, share values across the world's markets soared as word spread that billions of dollars were being spent in an unprecedented attempt to prop up the Yen and defuse the emergency threatening to engulf the Japanese economy.

[ image: President Clinton: major policy reversal]
President Clinton: major policy reversal
President Clinton authorised what amounted to a major policy switch to confront a crisis that's now threatening to wash up on American shores.

He said Japan is vital to US efforts at supporting an economic recovery and stability in Asia, which would support America's continuing prosperity.

President Clinton says Japan is vital to Asian and US prosperity
The US is concerned that if the yen continues to slide, a flood of cheap exports from Japan, the world's second biggest economy, may cost jobs and close factories around the world.

President Clinton said Japan had promised aggressive reforms to get its economy going and America would support them. He said the US and Japan agreed to intervene jointly again if necessary.

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Economy Contents

Relevant Stories

20 Jun 98 | The Economy
Japan told to sort out crisis

19 Jun 98 | The Economy
Evan Davies: What next for Japan?

17 Jun 98 | The Economy
Japan pledges reform as markets soar

12 Jun 98 | The Economy
Japanese woes make markets suffer

12 Jun 98 | Business
Japan goes into recession

Internet Links

Japan Economic Planning Agency

Keidanren: The Japan Federation of Economic Organizations

Is Japan Headed for Recession? Nihon Keizai Shimbun special report

Japan Development Bank

US Treasury

The BBC is not responsible for the content of external internet sites.

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree