The Coming Week in Asia: Japanese Growth, Yen Level Remain Focus

News reports have hinted that Japan will soon revise upward its GDP forecast for fiscal 1999.
Author:
Publish date:

TOKYO -- Pity Haruhiko Kuroda, Japan's vice minister for international affairs at the

Ministry of Finance

.

Every morning as he passes through the huge gates of his ministry, a mob of reporters surrounds him. "What about the dollar-yen rate?" one will inevitably shout. The understandably grumpy official -- all this happens before he's been able to gulp down a cup of coffee -- usually offers a brusque "no comment." If the yen's been on a tear, as it has been recently, he might mumble that a muscular yen is not desirable for Japan, which sells a lot to other countries.

Exporters such as

Sony

(SNE) - Get Report

, which blamed its downturn in profits this week to a strong yen, understand the minister all too well. The company, which generates close to two-thirds of its profits by selling PlayStations and other electronic gadgets overseas, watched as the yen ate up more than a quarter of its net profits for the first half of fiscal 1999.

While the MOF and Japan Inc. mull the prospects of a yen-inspired downturn, the

Economic Planning Agency

seems unperturbed by the yen's resistance to gravity.

Local news reports have hinted the EPA will soon revise the nation's

GDP

forecast for fiscal 1999 to around 0.9% from the earlier target of 0.5%. An extraordinary amount -- $1.1 trillion -- of government spending on public works projects and on injecting public funds into tottering banks is now thought to have a greater effect than previously calculated.

The news brought the yen to 103.71 yen vs. the dollar during Wednesday trading and if the currency rises to near 100 yen, intervention fears will again rattle the nerves of currency traders, many of whom already question if the yen is overvalued at these levels.

Some private sector analysts are also arguing the EPA's point, including

Andrew Shipley

, the senior economist at

Schroder Securities

.

"Besides government spending, a bounce in consumption also helps," he says, explaining why he raised his GDP growth target to 0.5%. Only when corporations start revising their currency forecasts from the current 113 yen to around 100 yen will the strength of the yen directly affect GDP as corporate spending is pared down, Shipley adds.

Positive economic news has been something of a rarity for the recession-weary Japanese. Like consumers anywhere else, they've tightened their purse strings in response to the less-secure future. Now that things look a little better, traders are looking for shares in companies that might benefit from a little more consumer generosity.

FamilyMart

, a convenience store operator, is one of those. Shares in the company jumped 21% this week as the firm announced plans to start an online shopping network, similar to rival

Seven-Eleven Japan

. The firm is hoping to see shares mirror the 67% rise Seven-Eleven has enjoyed since June when the firm announced its Internet shopping venture.

In Hong Kong, investors not yet signed up to buy shares in the government's

Tracker Fund

are hurrying to beat the end of the retail sales period, which ends on Thursday. The fund's $1.29 billion (HK$10 billion) initial public offering, which consists of blue-chip shares the government accumulated during a controversial stock market rescue during the Asian financial crisis, is the largest in Hong Kong this year.

With currency volatility and U.S. interest-rate fears pulling Asian markets back and forth, the notoriously risk-adverse Japanese investor may want to take a look at this Hong Kong deal before it's too late.