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CASA ASIA Economic Congress 2004

‘The Recovery of the Japanese Economy and Its Influence in Asia’

November , 2004

Takashi FUKAYA

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1. The Economic Relationship between Cataluña and Japan

•　 Economic relationship between Spain and Japan is good.

•　 Japanese enterprises energetic investment in Cataluña state. 　 (centering around manufacturing industry,142 Japanese enterprises have entered into the Cataluña market).

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2. Issues for Discussion

•　 Japanese and Asian economic trends. •　 Focus on India and China.　　－　 Big markets holding opportunity and risk.

•　 Differences between Asia and Western society.　　－　 Closer relationship overcomes differences.

•　 Vision of Asia and Japan.　　－　 The recovery of the Japanese economy and its influence in Asia.

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3. Recovery of the Japanese Economy

•　 Japanese economy escapes from long term recession, future strong recovery.　　－　 FY03, GDP 3.2% 　 Forecast by IMF, etc, 3 ～ 4%

•　 Government progress on regulatory reform, and structural reform. 　　－　 Push restructuring of enterprise and market renewal.

•　 Support for R/D and promote corporate innovation. 　　－　 Tax reduction for R/D, － Concentrate investment on specific projects.

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4‐(1). East Asia and Japan

•　 East Asian economic rapid growth. 　　－　 Strengthening export drive to practically use good and cheep labor force.　　－　 Formation of regional supply chain network. 　　　 (Regional Trade Dependence 1985: 36.2%. 2002: 51.8%)　　－　 Appearance of middle class with purchasing power.

•　 China is growth especially remarkable.　　－ Market-oriented economic reform, liberalization spring from WTO participation.

•　 Therefore, created global triangular trade system.　　－　 Japan ： advanced parts. ASEAN ： interim goods. China ： assembly.

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4- （ 2 ）　 Influence on Japanese recovery and way to expand cooperation•　 Japanese economy is affected by East Asian supply chain network.　　－　 For rapid spread of the trade relationship with East Asian economies.　　　　 (1992: $180bil, → 　 2002: $304bil,)　　－　 For FDI into East Asia.•　 Japanese recovery is also important to East Asia.•　 Therefore, East Asian countries and Japan promote FTA/EPA possibility.　　－　 2002: Conclusion with Singapore. 2003: Start negotiation with South Korea. 2004: Start with Thailand, Philippines and Malaysia. 2005: Will start with ASEAN.

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4- （ 3 ） . Risk and Potential of East Asia

•　 The growth of East Asia is an inherent systematic risk.　　－　 Increase energy consumption due to careless consumption.　　－　 Exchange rate risk due to dollar devaluation pressure.

•　 Japan is need to overcome systemic risk and play a role in Asia.　　－　 Supply capital, advanced technology and key industrial parts.　　－　 Policy and regulatory cooperation based on the Japanese experience. 　　

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5. India – The Great Elephant

•　 Increased Indian presence.　　－　 Interest due the base of IT business outsourcing.　　－　 Big territory and large educated population.

•　 Structural change an Indian economy/industry.(1980→2000)

　　－　 Share of agriculture in GDP: 38.6% 　→　 24.9%　　　　 Share of service sector in GDP: 37.2% → 48.2%　　－　 Formation of IT cluster.　　　　 (Bangalore region so called “Indian Silicon Valley”)

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6. Other Regions of Asia •　 History of Asian economic development.　　－　 Flying Geese Pattern Model. 　　　　 (Japan ＞ NIEs ＞ ASEAN ＞ China ＞ Where?)　　－　 Open and reformable policy of China. → 　 Market-oriented economic reform.

•　 Reasons for Asian success.　　－　 Division of production process leading manufacturing industry, and leveling welfare distribution.　　－　 Increase FDI → export oriented industry creation.

•　 But… environment of other areas of Asia (ex. Middle East) is different.　　－　 Continuation of political opposition.　　－　 Dependence on natural resources. 　　－　 Concentration of wealth.

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7. Toward Development of Asia

•　 Handling Asia’s potential and risks.　　－　 Maintain and spread the good growth cycle.　　　　 (Agree to the economic growth policy. → Provide an environment for FDI.　　　　 → Accumulation of industry. → Improvement of labor productivity through the welfare distribution. → Creation consumer market.)　　　　－　 Provision of the institutions for industrial structure reform and evasion of systemic risk. 　• Japan will contribute with Asian countries toward prosperity and stable growth of Asia.

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Muchas Gracias!