Has Japan and Asia turned the corner?

With a severely battered local economy, specifically, the substantial decline in revenue generation, we listen with a sense of hope that the Asian Crisis has in fact turned the corner. And this optimistic tidings, however difficult to pin down with certainty, turns into a debate of whether it is in fact recovery or stabilization.

A recent AP economic story raises a question: “What do you do with an economy when even free money fails to generate much excitement? That’s the dilemma Japan faces.”

“Interest rates are so low loans costs next to nothing, yet business aren’t borrowing. The government has handed out billions of dollars in free shopping vouchers, but nervous consumers aren’t spending.” People just put their money in the bank in case the economy gets worse. It’s a cautious behavior deeply rooted in frugality among Japanese who have learned to live in both good and bad times.

“On the anniversary of the financial crisis that struck Asia in the summer of 1997, there are signs the worst may be over for hard-hit countries like South Korea. But a decade after Japan’s ‘bubble economy’ of the 1980s began to deflate, Japanese leaders are still wondering how to fix it. After stumbling along at an average growth rate of just over one percent a year between 1992 and 1997, Japan’s economy sank into its longest postwar recession, shrinking for more than a year.

“The economy finally grew again in the first quarter of this year, expanding a robust 1.9 percent, the government reported June 10. But serious problems remain, analysts warn. ‘At best this is stabilization, not a recovery’,” according to Andrew Ballingal, an economist for Schroders and Securities.

Japan’s economy is the second largest in the world. It is larger than all of Asia’s economies put together. It is for this reason that Mr. Ballingal said “What is true for Japan is going to be true for all of Asia”. Mr. Richard Koo, an economist at Nomura Research Institute related “People said: ‘It’s temporary. In a few years it will go back up again’. But once they realized that it wasn’t going to happen they got pretty scared”. Even Prime Minister Obuchi warned against any assumption of real recovery before he left last weekend for the G-7 summit in Cologne, Germany.

What does it all mean for the NMI who relies on the Japanese tourism market to reboot its severely battered and ailing visitor industry? Let’s give tourism another ten years before any appreciable rebound takes place. Japan Inc. has substantive economic hurdles it must overcome, issues that are foreign to a simple islander’s nimble mind, if not, simplistic views of the workings of regional and global economics. And even if Japan really turns the corner, tourism here won’t be the same “as we know it”. It is this very aspect that the local officials must study beyond recovery.