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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

MIDYEAR BUSINESS OUTLOOK

JAPAN

STEADY AS SHE GOES


THE ECONOMY IS IN recovery mode -- but don't expect fireworks. Manufacturing is picking up, with electronics leading the way. A generally weaker yen has helped Japanese companies, many of whom had cut costs to boost productivity. Profits among blue-chips increased an average 11.5% to March, up for the third consecutive year. Car exports, at 2.2 billion units, rose 20% in the first half over a year ago. Back home, Japanese went on a shopping spree in March, ahead of a rise in the national sales tax from 3% to 5%. Department store sales plummeted the next month. But consumer spending, which equals 60% of total GDP, seems to be heating up this summer. There are still dark clouds. In May, unemployment rose to a high of 3.5%. Property, services, and smaller firms in general, are lagging the recovery. Lower public works spending for 1998 may put a damper on construction. But with the economy on the mend, a discount rate hike, which has stayed at 0.5% since 1995, looks likely. Some say that could be by September, though it is more likely to happen in 1998. Meanwhile, Tokyo's deregulation program is on track. End-1997 dollar rate: 117 (1996: 115). Nikkei 225 index: 18,690 (1996: 19,361).


UNITED STATES

SOLID AS A ROCK

AMERICANS HAVE NOT HAD IT THIS GOOD IN YEARS. Growth is strong and inflation low. Predictions of asset inflation, particularly in the long dormant property market, have so far been proven wrong. Still, the strength of new home sales in May surprised many analysts, who had forecast lower figures. Due to an incredibly mobile workforce, unemployment now stands at about 4.8%, close to levels last seen in the 1970s. New jobs in the communications, information technology and service sectors are being created faster than those lost by plant closings, company retooling or corporate down-sizing. Productivity growth is also keeping economists amazed. Low interest rates should continue; but an increase of about 0.5% may be in store as early as August, and probably not later than October. But the rate hike should not slow the economy dramatically. Given the consensus between President Bill Clinton and Congress, the budget deficit will likely continue to shrink. All this good news is boosting consumer confidence. But the happiest class of Americans may be financiers and investors. Doomsayers be dammed, Wall Street just keeps on breaking records. Dow Jones index, end-1997 : 8,000 (1996: 6,549).


CHINA

QUALITY NOT QUANTITY

INFLATION HAS CEASED TO BE BEIJING'S WORST economic nightmare, following the "soft landing" in 1996. And party chiefs intend to keep it that way. They are bent on a policy of moderation, to prevent a repeat performance of China's runaway growth in recent years. Barring a major natural disaster, a stable agricultural sector should keep the economy on track. Agricultural product prices are low. Household savings remain high, while the supply of consumer products outpaces demand. And unlike the late 1980s, there are now fewer conspicuous infrastructure bottlenecks in sectors like transport and power. But here is another worry for policy-makers: a stronger renminbi, poor liquidity among state firms, and lags in tax rebates have caused exports to flag. International demand is holding up, but poor product quality may deter future buyers. In response, exporters are upgrading, especially in the electronics and garment sectors. And China is still expected to reach its $310 billion total trade target for the year. But the toughest headaches have not changed: Beijing must tackle long-overdue reform of State-Owned Enterprises (SOEs) without stirring widespread social unrest. End-1997 dollar rate: RMB 8.26-8.50 (1996: RMB 8.30)


EUROPE

SOME TOUGH TASKS AHEAD

ROBUST EXPORTS, RISING INVESTMENT AND improving domestic demand should buoy Europe's prospects. But that won't help unemployment: double-digit jobless figures are likely to continue through 1998. Finland, Holland, Portugal and Spain are ahead on the recovery path. Eastern Europe countries should also grow faster than their Western counterparts. But core economies, like France and Germany, may not turn the corner until the second half of 1997, or later. For these, the biggest challenge will be to meet fiscal targets set by the Maastricht Treaty in readiness for monetary union in 1999. Those efforts will likely put a damper on the region's growth. Still, European Monetary Union is looking harder to achieve; and growing uncertainty may lead to currency instability. One bright spot is Britain, where modest growth of 3% and low inflation are expected. The new Labour administration's decision to stick to spending targets set by its predecessor has encouraged investors. A weakening deutschemark should shield Germany against any downturn in its overseas markets. Exports are also likely to drive growth in France. End-1997 dollar rate: DM1.70 (1996: DM1.56). London's FT index, end-1997: 4,500 (1996: 4,116)


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TIME:

COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

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ASIAWEEK:

COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness


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