Aug 30 2009

Contrasts in Asia

Published by under Global Economy

“When [unpopular governments] appear in other countries, there are movements in which people express their anger and demand change.  But this doesn’t happen in Japan because the LDP has held power for so long that the people have abandoned the possibility of standing up.”  – Yukio Hatoyama, 2001

 

I just spent the last two weeks in Asia, first in Japan and then in South Korea.  When I arranged the business trip several weeks prior, it certainly didn’t occur to me that I would have the opportunity to experience first hand such a significant moment in the history of both countries – and especially in Japan.

 

As of this morning, Yukio Hatoyama’s Democratic Party of Japan (DYP) has taken control of the Lower House and is now the ruling party.  In case you don’t know, this is major news considering the more conservative Liberal Democratic Party (LDP) has ruled for over five decades!  When I was in Japan, most people I talked to seemed to already know what the outcome of the election would be – and by our standards were acting quite blase.  Of course it is unlikely that a Japanese person would show too much emotion to a foreigner such as myself.  Several did admit that they doubt the DPJ will make significant progress, but they also acknowledged the LDP must take credit for too many squandered opportunities.

 

It is interesting to note that Mr.  Hatoyama comes from a wealthy, accomplished family, and has an interesting background, but this will be his first significant leadership role.  Not unlike the Democrats in the U.S., the DPJ promises to restore the anemic economy.  The problem is – there are no easy solutions.  Along with record public debt (greater than U.S.), Japan has one of the world’s worst demographic problems.  The low birthrate will create an environment in the next several decades where there will only be two working people per each pensioner.  This, of course, is a completely unsustainable situation.  I believe many average Japanese people are aware of the problems and this largely explains why the overall mood is less than uplifting.

 

A short distance over the Korea Strait, conditions are not so good either.  South Korea’s exports fell for a tenth consecutive month as demand for the country’s cars, electronics and materials continued to slide.  However, as reported by Bloomberg, “A weaker currency has helped South Korean exporters perform better than their Asian neighbors during the deepest global recession since the Great Depression.  Exports in Japan fell 36.5% in July from a year earlier, compared to Korea’s 21.8% decrease.”  Clearly, as bad as the economy is compared to a couple of years ago, it could be worse…and the Koreans seem to be taking it in stride.  From what I could determine, they continue to act rather upbeat and I found it quite remarkable to hear the public cheers and exuberance when they finally managed to launch a satellite – even if it did overshoot its orbit and fail to function properly.  Maybe one of my business contacts put it best, “The South Koreans are considered the Irish of Asia for good reason – they always recognize opportunity and they will work tirelessly to create a better future for themselves.”

 

As a final comment, regardless of where I have travelled this year, everyone is hopeful that the U.S. economy recovers quickly and remains strong in the future.  This is probably such a universal theme because – for as the U.S. economy goes – so goes the world…or so it would seem.

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