The Coming Week in Asia: Sunny Mood in Japan, But Daewoo Clouds Korea Outlook

Japanese traders and economists are cheering up as corporations report good news. But some in Korea are questioning the staying power of the Daewoo agreement.
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Is the sun finally peeping out from underneath the clouds?

Optimism, famously requested by Prime Minister

Keizo Obuchi

("We need constructive optimism," he stoically proclaimed, even as the country struggled through its worst recession since the end of World War II), is becoming all the rage. Cheer up, Japan. It certainly won't kill you.

Already economists and traders are starting to get happy as news from corporate statisticians is fueling hopes that government statisticians will follow suit. Number crunchers at

Toyota Motor

, for example, calculated the carmaker would export 60,000 cars more than expected through September. Happy news. More cars, more profits, more job security, more spending.

On Tuesday, traders are hoping the giddiness will continue. The

Ministry of International Trade and Industry

releases July industrial production data, which is expected to rise 0.3% from the previous month. That rise may be miniscule, but people are already rubbing their palms over the report's August forecast, which could be a shocker.

"I think there will be a dramatic turnaround in the August and September figures," says Soichi Okuda, senior economist at

Nippon Credit Bank

. "It's been a gradual rise, but the (forecast) figure is going to be larger than currently expected." He says the August figure, which will be important for Japan's big manufacturers, could rise 3%.

Although not as important as personal consumption, which makes up more than half of GDP and has suffered as Japan's average Joes rightly worry about employment security, industrial production constitutes more than 20% of the economy.

On the same day, Japan may get the good news that more people are unemployed. The figure currently stands at a record high of 4.9% and is expected to continue creeping higher in July. Why is that positive? Because it means Japan's tradition-bound corporations, which implicitly promise lifetime employment to their staff, are starting to rethink the way they do business. Maybe they'll think about idling operations that are no longer profitable rather than maintaining them to keep people in jobs. Maybe they'll start thinking about returning profits to their shareholders. Wouldn't that be radical?

"The newspapers may make a 5% unemployment figure front page news, but in reality, unemployment is a sign of restructuring. And everybody wants restructuring in Japan," says Okuda.

Restructuring is also what Japan's neighbor, South Korea, needs. And it has already begun. The government has effectively nationalized the virtually bankrupt

Daewoo

conglomerate. Late this week, Korean banks agreed to a debt-restructuring program for 12 Daewoo units that have frozen payments of principal and interest on an existing debt of $47 billion for 3 months.

More trouble may be brewing, however, as questions arise about how long wobbly Korean banks can shoulder Daewoo's woes. Those concerns were stoked when a meeting scheduled for Friday between Daewoo and foreign creditors was abruptly postponed until next week.

The unprecedented scale and complexity of reorganizing a Korean conglomerate the size of the Daewoo Group make the outcome of any restructuring program highly uncertain, noted

Standard & Poor's

analyst

Daisuke Fukutomi

. S&P downgraded Daewoo's corporate credit rating to CC -- junk status.

Talk of default is already in the air. Ironically, it comes at a time when the sun may finally be rising from its neighbor Japan.

Gaffe Alert

Japan may be embracing the Internet. But the Japanese don't necessarily understand how it works.

Fuji Bank

, one of the troika of Japanese financial institutions that announced it would form the world's largest banking group last week, engaged in a bit of chest-thumping last Friday. Proud of its soon-to-be position as a global financial powerhouse -- and undoubtedly anxious to pump up a stock price that is still about a quarter of its all-time high -- Fuji executives shipped off emails to global fund managers to tout the merits of its new relationships. Capitalize on the momentum, the bankers must have thought.

Great idea, lousy execution. The email contained a computer bug that prompts a message suggesting the recipient is "a big stupid jerk."

One can only wonder what the bank's monthly statements will say.