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Advanced and Emerging Economies– Two‐speed Recovery –
23 November 2010
Bauhinia Foundation Research Centre
Masaaki ShirakawaMasaaki ShirakawaGovernor of the Bank of Japan
Japan’s “Silver Yen” and Hong Kong’s “Silver Yuan”
Slide 1
Japan s Silver Yen and Hong Kong s Silver Yuanin the 19th century
Japan’s Silver Yen Hong Kong’s Silver Yuan
Source: Currency Museum, Institute for Monetary and Economic Studies, Bank of Japan.
Slide 2
Hong Kong as an Important Trading Partner for Japan
Share of Japan's Exports by Country and Region Share of Japan’s Exports of Agricultural Forestry andShare of Japan s Exports by Country and Region(2009)
Share of Japan s Exports of Agricultural, Forestry andFishery Products by Country and Region (2009)
(%) (%)
1 China 18.9 1 Hong Kong 22.21 China 18.9 1 Hong Kong 22.2
2 US 16.1 2 US 16.4
3 Korea 8.1 3 Taiwan 13.1
4 Taiwan 6.3 4 China 10.4
5 Hong Kong 5.5 5 Korea 10.3
6 Thailand 3.8 6 Thailand 4.1
7 Singapore 3.6 7 Singapore 2.8
8 Germany 2.9 8 Vietnam 2.7
9 Netherlands 2.3 9 Australia 1.2
10 M l i 2 2 10 Phili i 1 1
Source: Ministry of Finance, Trade Statistics.
10 Malaysia 2.2 10 Philippines 1.1
Bank of Japan Representative Office in Hong Kong
Slide 3
Bank of Japan Representative Office in Hong Kong
IMF W ld E i O l k (O b 2010)
Slide 4
IMF World Economic Outlook (October 2010)
Contribution to World GDP Growth (%)Contribution to World GDP Growth (%)
2009 2010 2011
World GDP growth (yoy) -0.6 4.8 4.2
United States -0.5 0.5 0.5
Euro area -0.6 0.2 0.2
Japan -0.3 0.2 0.1
Emerging Asia 1.5 2.4 2.2
Other countries -0.6 1.4 1.3
Notes: 1. Contributions to world GDP growth are calculated by the Bank of Japan staff.2. Emerging Asia is here defined as China, India, Korea, Taiwan POC, Hong Kong SAR, Singapore, Thailand, Indonesia,Malaysia, the Philippines, and Vietnam.
Source: International Monetary Fund, World Economic Outlook, October 2010.
Japan’s Real Exports
Slide 5
p pThe recovery of Japan’s real exports is mainly driven by Asian economies.
15(s.a., q/q % chg.)
5
10
15
-5
0
5
-15
-10
-25
-20
-300 7 0 8 0 9 1 0
Others US EU ASEAN4 NIEs China Total
Note: NIEs includes South Korea, Taiwan, Hong Kong, and Singapore. ASEAN4 includes Thailand, Malaysia, the Philippines, and Indonesia.Source: Ministry of Finance, Trade Statistics.
Japan’s Economic GrowthSlide 6
pEconomic growth decelerated significantly in the 1990s, called “Lost Decade.”
10 0(y/y % chg.)
8.0
10.0
4.0
6.0 4.6%(1970s)
4.4%(1980s)
2.0 1.5%(1990s)
1.7%(2000‐07)
‐2.0
0.0 (2000 07)
‐6.0
‐4.0
Source: Cabinet Office, Annual Report on National Accounts.
6.0
71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
Japan’s Mild Deflation since 1998
Slide 7
4 105(2005=100) (y/y chg, %)
Changes from a year earlier (right‐scaled)Index level (left‐scaled)
pConsumer Price Index
21002%
2 100
1%
0 95
‐2 90
19972004 20042008 20082010 19972010
Cumulative (%) ‐2.6 +1.5 ‐2.2 ‐3.3
485
Annualized (%) ‐0.4 +0.4 ‐1.1 ‐0.3
‐4 85
Note: Figures are adjusted for the impact of consumption tax, which was introduced at 3 percent in 1989, and raised to 5 percent in 1997.Source: Ministry of Internal Affairs and Communications, Consumer Price Index.
“Three Excesses”Slide 8
Resolution of “three excesses” led to the full-fledged recovery.
(DI <"excessive" "insufficient"> % points)
Production Capacity DI (manufacturing) Ratio of debts to nominal GDP(Private non financial corporations)(% )
20
30
40
Excessive
insufficient
(DI < excessive ‐ insufficient >, % points)
110
120
130
140(Private non‐financial corporations)(% )
‐10
0
10
Large enterprises
Small and medium‐sized enterprises
insufficient
80
90
100
110
‐20
85 87 89 91 93 95 97 99 01 03 05 07
(DI <"excessive" "insufficient"> % points)
Employment Condition DI (all industries)
70
85 87 89 91 93 95 97 99 01 03 05 07
Notes: 1. The Tankan has been revised from the March 2004 survey. Figures up to the December 2003 survey are based on the previous data sets. Figures from the December 2003 survey are on a new basis.0
10
20
30
40Excessive
insufficient
(DI < excessive ‐ insufficient >, % points)
y2. Debts is the sum of loans and securities (other
than equities) in private non‐financial corporations. Sources: Cabinet Office, Annual Report on National
Accounts; Bank of Japan, Bank of Japan, Tankan , Short‐Term Economic Survey of Enterprises in Japan
‐40
‐30
‐20
‐10
0
Large enterprises
Small and medium‐sized enterprises Short Term Economic Survey of Enterprises in Japan, Flow of Funds.
‐60
‐50
85 87 89 91 93 95 97 99 01 03 05 07
Small and medium sized enterprises
Labor Force GrowthSlide 9
Japan’s declining trend in labor force growth is significant amongG-7 countries.
1 5
2.0 (y/y % chg.)
1.0
1.5
0.5
‐0.5
0.0 Japan USACanada GermanyFrance UK
‐1.0
1980s 1990s 2000s
France UKItaly
Source: Organisation for Economic Co‐operation and Development.
1980s 1990s 2000s
Slide 10
Consumer Price Index in Terms of Goods and Servicesin Advanced Economies
Most of the distinction between Japan and other advanced economies can be explained by the difference in service pricescan be explained by the difference in service prices.
30(Cumulative changes from 1998 to 2010, %)
20
25
5
10
15
Goods
Service
‐5
0
5 Service
Total
‐10
5
Japan USA Euro Area UK
Sources: Ministry of Internal Affairs and Communications, Consumer Price Index; Bureau of Labor Statistics, Consumer Price Index;Eurostat, Harmonized Indices of Consumer Prices; Office for National Statistics, Consumer Price Index.
High Growth Era in Japan (mid 1950s‐early 70s)
Slide 11
High Growth Era in Japan (mid 1950s early 70s)and China (1990‐2010)
1955 60 65 70 75 80 (For Japan)1955 60 65 70 75 80
14%
16%
( p )
8%
10%
12%
4%
6%
8%
China(90-09)Japan's Growth (upper axis)
0%
2%
4%China's Average Growth(90-05)
Japan(56-80)
Japan's Average Growth(56-70)
Japan's Average Growth (56-70, upper axis)
China's Growth (lower axis)
Chi ' A G th (90 05 l i )
-2%
1990 95 2000 05 10
China's Average Growth (90-05, lower axis)
(For China)
Sources: Cabinet Office, National Accounts; National Bureau of Statistics of China, National Accounts.
Equity Flow into Emerging Economies
Slide 12
Equity Flow into Emerging Economies
40 (USD billions)
20
30
10
-10
0
-30
-20
Net purchases of emerging market equities by non-residential investors
-40 2008 2009 2010
Note: The figure above is the sum of net purchases of emerging market equities in India, South Korea, Taiwan, Indonesia, Thailand, the Philippines and Brazil.
Sources: Bloomberg, CEIC.
Stock Prices in Asian Emerging Economies
Slide 13
250
300historical peak
250
300
hi t i l k250
300
250
300
Indonesia Philippines India Malaysia
150
200
250
150
200
historical peak
150
200historical peak
150
200historical peak
0
50
100
09/01 10/01
0
50
100
09/01 10/01
0
50
100
09/01 10/01
0
50
100
09/01 10/0109/01 10/01 09/01 10/01
300
09/01 10/0109/01 10/01
300 300300
Hong Kong South Korea Thailand China
150
200
250
150
200
250
150
200
250
150
200
250
0
50
100
0
50
100
0
50
100
0
50
100
Source: Bloomberg.
0
09/01 10/01
0
09/01 10/01
0
09/01 10/01
0
09/01 10/01
F i R i A i E i E i
Slide 14
Foreign Reserves in Asian Emerging Economies
4,500(billion U.S.$)
3 500
4,000
Philippines
3,000
3,500 Philippines
Indonesia
Malaysia
2,000
2,500Thailand
Singapore
H K
1,000
1,500Hong Kong
Taiwan
Korea
0
500 China
Source: CEIC.
0 1 0 2 0 3 0 4 0 5 0 6 0 7 0 8 0 9 10
Economic Growth in G‐7 CountriesSlide 15
For real GDP growth, Japan slipped down to a lower-class in G-7 in the 1990s.Nevertheless, in real GDP growth per worker, Japan shows comparable
f t th US d l t d idl i th 1990
5.0 (y/y chg, %)
4.0 (y/ychg, %)
performance to the US, even decelerated rapidly in the 1990s.
Real GDP per workerReal GDP
4.0
Japan USACanada GermanyFrance UKItaly
3.0
3.0
y
2.0
1.0
2.0
0.0
1.0
0.0
1.0
‐1.0
1980 1990 20001980s 1990s 2000s 1980s 1990s 2000s
Notes: 1. The figures for Germany of the 1980s are those of West Germany. The figures for Germany for the 1990s are the average from 1992 to 1999.2. The figures for the period 2000s are from 2000 to 2008.
Sources: Organisation for Economic Co‐operation and Development and other governmental sources.
LIBOR‐OIS spreads
Slide 16
(%)
Japan’s financial system was relatively stable during the financial crisis.
3.5
4.0
USD
2.5
3.0
GBP
1.5
2.0 EUR
0.5
1.0
JPY
0.0 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10
Note: 3 months.Source: Bloomberg.
Sh i J ’ E t b C t d R i
Slide 17
Shares in Japan’s Exports by Country and Region
100 (%)
80
60
Others
USA
EU
40
ASEAN4
NIEs
China
20
0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Note: NIEs includes South Korea, Taiwan, Hong Kong, and Singapore. ASEAN4 includes Thailand, Malaysia, the Philippines, and Indonesia.Source: Ministry of Finance, Trade Statistics.
l i G
Slide 18
Total Primary Energy Input per GDPJapan’s energy efficiency is the highest in the world.(Index Japan=1)
16.8
16
18
(Index, Japan=1)
10
12
14
6.1 6.3
7.88.3 8.3
6
8
10
1.01.8 2.1 2.5
3.1 3.2 3.1
2
4
0
Japan EU27 US Australia Canada Korea Thailand Middle India Indonesia China Russia WorldEast
Sources: International Energy Agency, Energy Balances of OECD Countries 2009 Edition, Energy Balances of Non‐ OECD Countries 2009 Edition;Agency for Natural Resources and Energy, Annual Energy Report FY 2010 (Japanese version).
Global Foreign Exchange Market Turnover
Slide 19
Global Foreign Exchange Market Turnover(Percentage shares of currency as of April 2010)
US dollar
42%
4%
18%US dollar
Euro
10%
6% Japanese yen
Pound sterling
20% Asian Currencies (excluding Japanese yen)
Note: Asian currencies include Hong Kong dollar, Korean won, Singapore dollar, Indian rupee, New Taiwan dollar, Chinese renminbi,Malaysian ringgit, Thai baht, and Indonesian rupiah.
Source: Bank for International Settlements Triennial Central Bank Survey
Other Currencies
Source: Bank for International Settlements, Triennial Central Bank Survey.