Japan's crisis assistance to its production networks in East Asia: Throwing good money after bad?

The Asian economic crisis did not only put into question the Asian economic model, once considered as the basis of quote;The East Asian Miraclequote; (World Bank 1993), as well as the traditional crisis assistance strategies of the global financial institutions. It also raised doubts about the sustainability of the regional economic policy of Japan based on the assumption of a harmonious economic development modeled on the Flying Geese theory, in which Japanese companies would act as a catalyst for the economic development of the East Asian countries.

In the Asian economic crisis, these Japanese companies, but especially their local suppliers, were suffering from falling internal demand, soaring local currency value of their dollar-denominated debt and financing difficulties due to the widespread local credit crunch. The situation of the Japanese banks, reducing their exposure and aggravating the financial distress of many companies, only made things worse and led to fears of a widespread withdrawal of Japanese companies from East Asia.

How did the Japanese institutions, like the Japan Exim Bank and the OECF (which have since merged to form JBIC) and JICA, react to this situation? What is the rationale of Japan’s assistance programs like the New Miyazawa Initiative or the Resource Mobilization Plan for Asia?

Were they exclusively concerned with assuring the survival of the Japanese companies in the region, or did they include suppliers and other local companies in their assistance programs, in view of the overall economic development of the crisis countries? Which conclusions with regard to possible changes of Japan’s regional policy and development assistance can be drawn from a closer look at Japan’s crisis assistance?

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Christian SCHROEPPEL, born in Munich, Germany, in 1974, has studied Sociology, Political Science, and Economics at J. W. Goethe University, Frankfurt, and the Institute for Political Studies of Paris (quote;Sciences Poquote;). He is a PhD candidate at J. W. Goethe University, Frankfurt, where he obtained his MA in Sociology in 1999, and is working at the German Institute for Japanese Studies (DIJ) as a scholarship holder. His dissertation project, supported by the Studienstiftung des deutschen Volkes, focuses on the situation of the Japanese production networks in the Asian economic crisis and the support they received from Japanese institutions. At the DIJ, he is currently examining the renewed efforts to strenghthen the regional monetary and financial cooperation in East and Southeast Asia.