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No. 24 — June 23, 2000

Feature Article

RAPID RECOVERY IN SOUTHEAST ASIA STRENGTHENS JAPAN-ASEAN ECONOMIC RELATIONS

Marc Castellano

Summary

Economic links between Japan and the member countries of the Association of Southeast Asian Nations run deep. Indeed, substantial trade, aid and investment form the backbone of strong bilateral relationships. The financial and economic crisis triggered by the devaluation of the Thai baht in July 1997 reverberated throughout East Asia and temporarily weakened the Japan-Asean connection. However, the region's recent and unexpectedly speedy recovery has put economic relations back on a rapid-growth track.

The 10 Asean nations — Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (formerly Burma), the Philippines, Singapore, Thailand and Vietnam — were keen to restore growth quickly and worked hard to boost trade and investment. Regional commerce picked up as stability returned, and Japanese investment, after a short-lived slowdown, looks set to flow back into the Southeast Asian market.

On the aid front, the Japanese financial assistance packages that were introduced to soften the blow of the crisis have run their courses. But cooperative efforts have produced a major new regional fund that may help to avoid a future economic meltdown. Japan, Asean and other regional partners have reached a landmark agreement to establish a substantive crisis-prevention facility.

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Weekly Review

AND THEY'RE OFF! CAMPAIGNS BEGIN FOR LOWER HOUSE POLLS
--- by Barbara Wanner

Official campaigning began June 13 for the June 25 lower house elections. These contests will give voters their first opportunity in nearly four years to pass judgment on the leadership of the Liberal Democratic Party-led government, which includes the New Komeito and the New Conservative Party. According to a June 18 poll by Kyodo Wire Service, 44 percent of the electorate still is undecided. In an effort to capture the support of this powerful, election-swinging bloc of uncommitted voters, the 1,404 candidates fielded by the ruling parties and the four main opposition groups — the Democratic Party of Japan, the Japan Communist Party, the Liberal Party and the Social Democratic Party of Japan (see Table) — hit the hustings with abandon.

 

CONDITION OF JAPAN'S ECONOMY UPGRADED
--- by Douglas Ostrom

Japan's economy is on the mend — at least according to a recent Economic Planning Agency report and a declaration from an EPA advisory group. While many independent analysts tend to agree with the official assessment, they also suspect that the agency may be overstating the case ahead of the June 25 elections for the lower house of the Diet.

 

RESTRUCTURING OF JAPAN'S BANKING INDUSTRY PICKS UP SPEED
--- by Jon Choy

Domestic and overseas observers alike agree that Japanese banks and banking practices are being revamped from top to bottom. This process never was expected to be smooth or painless. However, as several recent events demonstrate, new forces, both local and foreign in origin, are reshaping Japan's banking landscape in totally unforeseen ways.

 

MORE OF JAPAN'S AID HAS STRINGS ATTACHED
--- by Marc Castellano

Although Japan again was the world's largest aid donor in 1999 (see JEI Report No. 23B, June 16, 2000), more of its official development assistance was extended on conditional terms. According to the Japan Bank for International Cooperation, the government-affiliated agency created from the October 1999 merger of the Export-Import Bank of Japan and the Overseas Economic Cooperation Fund, the proportion of tied loans reached 16.4 percent in FY 1999 — the highest level in 10 years (see Figure). Aid provided on this basis requires recipients to procure goods and services for development projects from Japanese sources.

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