Japan may be an economic superpower (on paper only), but it is not an independent political power. In order for trade with the US to grow beyond trade barriers, historically the Japanese had to allow their trade surplus to be invested mostly in US assets and US production facilitates. In the last decade, Japan had begun to invest in Asia to develop an Asian market. But the nature of market capialism is such that the export side grows exponentially faster than the domestic side, resulting in overcapacity in relation to a slow growing global consumption market. The problem was that unlike the US market, Asia did not, and still does not, have a central authority to manage a stabilizing regional economic and trade policy and to ensure a balance between production and consumption. While the US controls, to a lesser extend as time passes, Asia politically, its economic involvement in Asia has been relatively minor. American banks lost only US$30 billion in Asia since 1997, while Japanese banks lost US$450 billion and European bank who came late, lost US$250 billion . This was the result of the US strategy of maintaining global political control with money from dependent allies (18% IMF contribution, 95% control). The Americans are very smart. Because of the size of the American economy and American dominance in the global financial structure, foreign capital in the US becomes domestic capital. If the Japanese starts to sell their US assets, they loose as much as the Americans, perhaps more brcause the Japanese sell to America. That is why Japan cannot act like a financial superpower despite of their paper wealth. Just like nuclear arms control scholastics, the American financial system has been designed so that it cannot be destabilized by opponents because it is a doomsday machine. Another point is that since Asia, along with the rest of the world, suffers from overcapacity, its problem cannot be solved by further injection of capital. As has been pointed out by others, new funds are needed by Asia merely to bail out the existing creditors. What Asia (and the world) needs is greatly expanded consumption to absorb the overcapacity. Yet market capitalism does not permit increased consumption without increased investment which in turn exacerbated overproduction. What the global economy needs is getting used to a drastically lower rate of return on capital, say 3% instead of 20+%, with the 17+% transactional surplus (profit) to go directly to labor rather than to capital, thus stimulating consumption by providing purchasing power to workers. (Even Soros supports this idea). Investment bankers were complaining that 20% returns were not enough just prior to the crash because the money could go next door and get 25%, causing a race to the bottom in wages and environmental pollution all over Asia. Capital has no where else to go if the global standard return is fixed at 3%. Within a short time, the norm would be widely accepted. It is a myth that the world needs capital and must meet its terms. On the contrary, capital needs the world and must meet its terms.
The following had been posted earlier, but is pertinent to your question.
The Asian Financial Crises have sparked the reemergence of regionalism. The G7, G10 or G20 structures, categorizing economies by wealth, are increasingly irrelevant, as reflected since by the loss of influence of the Trilateral Commission, the Club of Rome, and the like. The surprised success of the euro is stimulating new thinking about Asian regionalism, among intellectuals and some government officials. During the annual IMF meeting held in Hong Kong in October 1997, 3 months after the collapse of the Thai currency that began it all , a Japanese proposal for a regional rescue plan was killed, not surprisingly, by the Americans in favor of the US-controlled IMF. Many in Asia had thought that a Japanese-led rescuse would have been more effective and at least less damaging than the failed IMF attempts. That view is now reluctantly acknowledged, if still not openly accepted, even within the IMF and the US Treasury Dept. With the coming of the euro, the vision of an unified Asian currency has gained momentum. In the long run, the world may see the replay of a new Bretton Woods agreement, but instead of a gold-backed US dollar that became fatally wounded in 1973 by decades of US fiscal irresponsibility, this time it may well be a USD-EURO-Asian Unit parity arranged under the umbrella of a UNO world currency, to rid us of the destructive currency turmoil of the past decades. The problems to be overcome toward this vision is immense, including a need to reorient Asian political attitudes and a historical legacy of conflicts further poisoned by the divide and rule policies of 150 years of Western imperialism. And the G7 now must cut the smaller economies a better deal. But then less than 10 years ago, no one expected the euro to be realistically possible. And if Europe, with its long history of wars and conflicts, can come together for a common good, why not Asia and the world?
Dennis R Redmond wrote:
> On Wed, 11 Nov 1998, Henry C.K. Liu wrote:
>
> > economic order. Tokyo has no desire to become another London after the
> > Big Bang and Asia does not want to become like Latin America.
> > The sooner American policy makers accept and deal with this serious
> > communication and conceptual gap, the sooner the dialogue will be on
> > track for real solutions.
>
> OK, but then why are the Japanese not acting like the superpower they
> indeed are? They've certainly got the cash and connections to rescue
> themselves, not to mention Asia. Why doesn't Japan just set up its own
> Pacific Development Bank or something and tell the US and IMF to go to
> hell? Japan doesn't need US capital, but the US sure as heck needs
> Japanese capital, right? Or is it just that Japan is just
> beginning to figure out that they (along with the EU) won the Cold War?
>
> -- Dennis