Japan benefits from globalisation

The most powerful trend in the world today is the accelerating pace of economic globalisation. During President Bush's swing through Asia, the power of globalisation was clear. The trip began in a Japan that finally seems to be recovering from a decade-long slump, thanks largely to the fact that market forces are busting the walls of protection and inefficiency that had held the Japanese economy in suspended animation, says David Ignatius.

Some examples of the painful process of Japanese recovery:

Responding to international market pressures, the manufacturing giant Matsushita has closed 30 factories around the world and cut its Japanese workforce 20 percent since 2000; its profits were up 27 percent in the most recent quarter.

Toray Industries, Japan's biggest producer of synthetic fabrics, has cut its costs $120 million over the past year and moved many jobs to China; its profits rose 23 percent in the most recent quarter.

Also, Japan's once-bloated banking sector has shrunk to a sensible valuation:

In 1987, it accounted for 24 percent of the total market capitalisation of Japanese stocks; in April, it represented just 2.3 percent, according to BusinessWeek.

And foreign capital is finally welcome: foreigners owned just 9 percent of the shares traded on the Tokyo exchange in 1989; today, it's 32 percent.

This globalised Japan is growing again, says Ignatius. The Nikkei average is up 38 percent this year, measured in dollars, and the economy overall is expected to grow by about 2 percent in 2003.

In the United States, the current "jobless recovery" may actually be a healthy American version of restructuring. One in which companies are slowly burning off the excess investments of the 1990s bubble economy, explains Ignatius.

Source: David Ignatius, Globalisation’s Lessons, Washington Post, October 24, 2003.

For text http://www.washingtonpost.com/wp-dyn/articles/A9347-2003Oct23.html

For more on International Economic Growth

FMF Policy Bulletin\28 October 2003