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Preface to the Fourth Edition
- ISEAS–Yusof Ishak Institute
- Chapter
- Additional Information
xxiii Preface to the Fourth Edition Forceful measures have not been taken despite favourable economic fundamentals Japan’s economic role in the world and Asia in particular, has been diminishing since the collapse of the bubble economy in 1991. Over the last 12 years, the Japanese economy has not managed to recover and her contribution to Asia (in terms of foreign direct investment, international trade, Official Development Assistance and technology transfer) is becoming less and less important. Needless to say, the Japanese and Asian economies are interdependent as well as complementary. Japan can contribute more to Asia only when she has recovered economically. Similarly, Japan can benefit more from Asia only when Asia’s economic development is on the right track. On Japan’s side, despite a long period of economic sluggishness, some economic strengths have surprisingly remained unchanged. Japan is considered as number one in the following categories. First, foreign currency reserves have amounted to US$485.3 billion as of March 2003 (China ranks second in the world with US$212.2 billion in year 2001). It is due in large part to Japan’s international trade drive and more recently, the government’s currency interference through selling Japanese yen in exchange for the greenback, in order to fulfill a weak yen policy. Second, Japan’s total net overseas assets amount to 133 trillion yen as of December 2000. Overseas assets held by Japanese banking corporations alone have amounted to 45 trillion yen as of December 2002. It indicates that Japan has accumulated a substantial amount of long term overseas capital investments as well as foreign national bonds and equities, especially in the United States. 00 Japan&China_Prelims 11/6/07, 12:19 PM 23 Preface to the Fourth Edition xxiv Third, Japan’s ODA during the 1991–2001 period was the largest among the DAC countries. It became the second largest since 2002 but still accounted for US$9.7 billion (1 trillion 250 billion yen) in May 2002. The ODA budget reflects the economic strengths of a country and it has also been used to stimulate the advancement of a country’s foreign business activities. Fourth, Japanese national assets (cash, deposits, bonds, investment securities, shares, insurance and pension) amounted to 1386 trillion yen by March 2001. It reached 8275 trillion yen in December 2002, if real estate and buildings are included. The main task of the Japanese government now is to mobilize these national assets in order to expand the domestic market and to activate the economy. Besides these economic strengths, both big and medium-small sized Japanese enterprises have accumulated world-class technologies, which guarantee Japan’s industrial development despite the economic recession. Furthermore, the economic downturn over the last 12 years has created a 5.6% unemployment rate in Japan, which is still rather healthy compared to the double digits we see in some European countries. And this is the reason why Japan is not in a chaotic situation. Very few people could have predicted that Japan’s economic downturn would drag on for 12 years, with no sign of recovery. Many Japan watchers are puzzled and cannot pinpoint what exactly is wrong with the Japanese economy. Policy-makers in Japan have so far managed to identify some basic ailments of the Japanese economy: non-performing loans, deregulation, deflation, strong Japanese currency and privatization etc. However, forceful measures still need to be taken to counteract these problems and fulfill economic goals. Asia sees Japan’s economic deterioration as a burden to Asian economic development. Now, Asia is expecting Japan to emerge from the economic doldrums, hopefully in 2–3 years time, and contribute to Asia’s economic development in accordance with her economic strengths. Can Japan’s Role be Replaced by China? China has been Japan’s rival in Asia, in the economic, political, military and diplomatic arena. China’s role in Asia, even if we restrict it to the economic front, has been increasing and to a certain extent, has replaced Japan. In the long run, China’s role will become significantly more important at the expense of Japan. 00 Japan&China_Prelims 11/6/07, 12:19 PM 24 [34.228.239.171] Project MUSE (2024-03-29 05:41 GMT) xxv Over the last 25 years, since she started implementing a ‘reforms and open-door policy’ in 1978, China has become the first country in the world to succeed in rapid and continuous economic development. Economic development in special economic zones and coastal areas...