China, South Korea and Japan held their first every leaders’ summit at the weekend as more signs emerged that the Asia Pacific region’s economic health is looking more and more patchy.
Friday saw Japan reveal a $US225 billion stimulus package, South Korea confirmed that its economic growth had slowed sharply and India said industrial production had fallen for the first time in more than a decade.
China saw a warning from a senior banking regulator about the health of the Chinese financial system, and there’s great interest in the release later today of industrial production figures for last month for November that will show a further slowing in activity, and an actual fall from September through to the end of last month.
The Chinese Government also revealed plans to boost bank lending next eyar to try and help finance a rebound from the current slowdown.
South Korea said at the weekend it would lift its cooperation with Japan and China to tackle the fallout from the global financial crisis; a stance that is understandable given the way the country’s currency has been battered lower this year and the economy has slumped (along with the stockmarket, but that’s a common theme across the world).
South Korean President Lee Myung-bak met Japanese Prime Minister Taro Aso and Chinese Premier Wen Jiabao in southern Japan in the first the summit between the three countries, which have a long history of animosity towards each other (Japan was the occupier of Korea from 1910 to the end of the war and China occupied Manchuria and other parts of China from the 1930s through to 1945.).
The summit among the leaders of the three North Asian countries, which account for 75% of the region’s economy and two-thirds of its trade, came hard on the heels of the failure of a bailout for US auto makers that sparked sell-offs in global stock markets and sent the dollar to a 13-year low against the yen.
The White House then stepped in to look at extending emergency aid for General Motors and Chrysler especially, after the Senate sank the $US 14 billion bailout plan.
South Korea is the weaker of the trio: its economy and financial system is under the greater pressure (although Japan has growing concerns of its own and China is facing a rapid slump in economic activity).
So that’s why South Korea sought and obtained agreement on new currency swap deals with Tokyo and Beijing worth nearly $US50 billion.
South Korea wants to boost a regional web of bilateral currency swap deals known as the Chiang Mai Initiative (CMI).
Besides the stimulus plan on Friday, Japan also increased a bank rescue package to $US131 billion.
Reports appeared in Tokyo newspapers and other media Saturday that the huge Toyota Motor Company was now looking at a second half loss of at least $US1 billion because of the continuing slump in car sales around the world.
The stronger yen is adding to the pressures on the company (and all other Japanese exporters).
Toyota had been forecasting a second half operating profit of just $US200 million, but that has evaporated as car sales in the US and Japan (and Europe) have continued falling.
South Korea has already announced a $US155 billion measure to shore up its banking system, stimulate spending and lower taxes
Japan’s latest package came after earlier tentative packages from the previous administration: that was a month after China launched a 4 trillion yuan ($US586 billion) stimulus plan. China said last week it would boost public spending and cut taxes.
Figures last week showed that the world’s second largest economy fell into a worse recession than thought in the third quarter.
Today the quarterly Tankan survey from the Bank of Japan is expected to show big business in the country at its gloomiest for more than 30 years.
The Tankan is a sentiment and expectations survey and looks at employment, exports, investment and other key measures for the big end of Japanese business which includes all the major exporters.
A recent survey showed that more than one-third of Japanese companies have laid off workers or taken other steps to reduce labour costs over the past three months to cope with the economic crisis.
Friday also saw the Japanese parliament approve a law to let the government pump funds into banks to protect them from the financial crisis.
South Korea’s central bank said Friday that the country’s economy contracted in the fourth quarter and will grow at the slowest pace in 11 years in 2009.
The Bank of Korea said the economy grew shrunk at an annual rate of 1.6% in the October-December period as exports slumped sharply.
The central bank forecast that the economy will grow only 2.0% next year, compared with an estimated 3.7% this year.
The bank said next year’s forecast was based on the assumption that the world economy will grow 1.9% per cent in 2009.
”If the global economy contracts, our growth rate could be lower and the worst case scenario of a minus growth is possible,” Kim Jae-chun, a BoK research director, was reported as telling the media at a news conference.
The 2% rate for next year would be the lowest since the Korean economy contracted 6.9% a decade ago in the wake of the Asian financial crisis.
The gloomy forecast came a day after the central bank cut its key interest rate by a full percentage point to a record low of 3%.
The central bank forecast that gross domestic product will grow only 0.6% in the first half of next year and 3.3% in the second half and the economy will recover in 2010, with GDP rising 4%.
