Japan, South Korea explore free trade
Political differences once in existence between Japan and South Korea once hindered the import and export industries of both companies. Now, with S. Korea's economic recession and Japan's economy staggering, there has been much conversation over the possibility of a free trade zone consisting of the two countries. This meaning the free movement of good, capital and people as President Kim Dae-jung of South Korea conveyed his government's position to gradually lift its country's ban on the Japanese culture. In the past, Japan's trade relationship with South Korea had been heavily restricted but with more meetings on the rise, South Korea promised that the previous discriminatory regulation on Japanese products would be eliminated in hopes to reduce South Korea's trade deficit with Japan. Prospects of the free investment agreement should be reached in two years.
Largest Chaebols' Pledge to Restructure Raises Doubts
The five largest business groups of South Korea, known as chaebols have promised to downsize, selling off some of their assets in order to reduce the debt-to-equity ratio but this promises is raising skepticism. The top five chaebols all claimed that they would reduce their affiliates by 40-70% and their debt-to-equity ratio to 2:1. However, the trend within the companies is showing absorption of their smaller companies rather than the restructuring and elimination of some of the companies' affiliates. In addition, rather than reforming and reducing, companies such as Hyundai has launched a 6-year $900 million tourism project with North Korea. Other chaebol companies have also entered into various expansion expeditions, using the merger of their smaller companies to have a decreased number of affiliates but no real cuts of reform or restructuring have been made since their promise in early December.
With its economy staggering, nation doubts itself
There is a fear that if Japan does not recover from its economic crisis, Japan alone might trigger a worldwide recession. A world consensus shows that, given its overwhelming size and presence in the entire Asian economy, unless Japan's economy recovers, Asian countries wouldn't be able to expect a recovery in their own economies. On top of which, Japan was urged to help other Asian economies ride out the crisis by providing financial and other support, promoting Japan's government to announce a $30 billion program of assistance extended to countries such as Indonesia, Malaysia, Thailand and South Korea. The program came second to the already agreed upon $42 billion Japan provided the International Monetary Fund's bailout package to Asian countries with a currency crisis. There is a possibility that the economy will not be able to return to growth in fiscal 1999 despite the government's prediction for a 0.5% growth. Should this growth not occur, Japan would suffer from economic doldrums leading to its nation further into self-doubt and a loss of direction.