THE BIG BUZZ SAW is coming closer. That Asian economic slowdown which began in Thailand and spread to Indonesia and then to Malaysia is now gripping Japan and South Korea, the world's No. 2 and No. 11 economic powers, respectively.
This spreading slowdown will surely dominate the Asia Pacific Economic Cooperation (APEC) forum, meeting now in Vancouver, British Columbia. This 18-nation group was designed to promote burgeoning trade, but instead must focus on rescue efforts so that wounded tigers are not crippled.
Korea fell victim when this slowdown reduced demand for Korean products and sliced profits at Korean firms, leading to bad loans and a weakened won. A change in finance ministers, after the government failed to protect the currency's value against the dollar, produced emergency measures to revive confidence. These include relaxed controls on currency trading and on bank mergers and a quest for $10 billion in emergency loans.
All this is designed to head off the stigma and conditions of an International Monetary Fund bailout. Pacific rim finance officials meeting in Manila tried but failed to create an "Asia fund" to assist countries without the strings the IMF imposes.
Japan's own economic slowdown appeared to be over, but then Southeast Asian problems blew back to haunt Japanese exporters as well as industries and banks that lend to them. The Hokkaido Takushoku Bank, with $76 billion in assets, collapsed Monday. Another bank will take on its obligations and the government has perhaps rashly promised that no tax yen will be used for a bailout.
Japan's government announced a great liberalizing of financial regulation, similar to Britain's "big bang" of 1986. It will allow such market-driven innovations as mutual fund sales at banks, 24-hour automatic teller machines and self-service gasoline stations. While these reforms are welcome, the benefits may be too long-range to relieve Japan's bank crisis. More reform measures are due next month.
World economic growth has been slowed -- but not reversed -- by bubbles bursting in Asia. If effective measures are taken by local governments there, the region's economies should gradually begin to revive.
Pub Date: 11/20/97