The term Four Asian Tigers or East Asian Tigers refers to the economies of Taiwan, Singapore, Hong Kong, and South Korea.They are also known as Asia's Four Little Dragons. These countries and territories were noted for maintaining high growth rates and rapid industrialization between the early 1960s and 1990s. In the early 21st century, with the original four Tigers at fully developed status, attention has increasingly shifted to other Asian economies which are experiencing rapid economic transformation at the present time.
The Four Asian Tigers pursued an export-driven model of economic development; these countries and territories focused on developing goods for export to highly-industrialized nations. Domestic consumption was discouraged through government policies such as high tariffs. The Four Asian Tigers singled out education as a means of improving productivity; these territories focused on improving the education system at all levels; heavy emphasis was placed on ensuring that all children attended elementary education and compulsory high school education. Money was also spent on improving the college and university system
The Crisis -
The Four Asian Tigers were strongly affected by the 1997 Asian financial crisis, which impacted each Tiger to varying degrees. While Taiwan was not as strongly affected, South Korea was badly battered by the crisis. However, South Korea rose up to become the 9th largest economy in the world (2007 standard) and Taiwan stayed as the 16th largest economy in the world. Because of the focus on export-driven growth, many of the Tigers became caught up in a game of currency devaluation. The current criticism of the Four Asian Tigers is that these economies focus exclusively on export-demand, at the cost of import-demand. Thus, these economies are heavily reliant on the economic health of their targeted export nations. In addition, these nations have met difficulties after they lost their initial competitive edge, cheap productive labour. India, China and much of Southeast Asia have now emerged as fast-growing economies based on cheap labour, largely replacing the Tigers.
Some economies were becoming overheated, stock prices were overvalued, property prices were sky-high and investors were jittery and nervous. Because of the structural weaknesses in the regulatory framework, once capital flight began, the stock market nosedived and the major Asian currencies depreciated significantly. This caused social unrest, political instability, regime change and financial bailing out by the International Monetary Fund. This also gave impetus to some Asian governments to impose capital controls to restrict currency outflows and maintain monetary and financial stability.
Saturday, May 10, 2008
Japanese Asset Bubble
The Japanese asset price bubble was a time of skyrocketing land and stock prices in the Japanese economy, lasting from 1986 to 1990. It is one of the most famous economic bubbles in the history of modern economics.
In the decades following World War II, Japan implemented stringent tariffs and policies to encourage the people to save their income. With more money in banks, loans and credit became easier to obtain, and with Japan running large trade surpluses, the yen was able to appreciate against foreign currencies. This allowed Japanese companies to invest in capital resources much more easily than their competitors making goods cheaper and widening the trade surplus further. And, with the yen appreciating, financial assets became very lucrative.
Unfortunately, with so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. The Nikkei stock index hit its all-time high on December 29, 1989 when it reached an intra-day high of 38,957.44 before closing at 38,915.87. The rates for housing, stocks, and bonds rose so much that at one point the government issued 100-year bonds. Additionally, banks granted increasingly risky loans.
At the height of the bubble, a commonly-quoted claim was that the land beneath the Imperial Palace in Tokyo was worth more than the entire state of California. Japan regained a sense of national pride and assertiveness as a result of its new power, which manifested itself in works such as The Japan That Can Say No by Shintaro Ishihara and SONY founder Akio Morita. Many outside Japan were alarmed by this resurgence, leading to criticism from foreign observers. Michael Crichton, for example, wrote Rising Sun at this time, which highlighted US concerns with the growing Japanese economic power
Prices were highest in Tokyo's Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime "A" property in Tokyo's financial districts were less than 1/100th of their peak, and Tokyo's residential homes were 1/10th of their peak,[citation needed] but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market
With Japan's economy driven by its high rates of reinvestment, this crash hit particularly hard. Investments were made increasingly out of the country, and Japanese manufacturing firms lost much of their technological edge. As Japanese products became less competitive overseas, the low consumption rate began to bear on the economy, causing a deflationary spiral.
The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many "zombie businesses
The time after the bubble's collapse (崩壊, hōkai?), which occurred gradually rather than catastrophically, is known as the "lost decade or end of the century" (失われた10年, ushinawareta jūnen?) in Japan. The Nikkei 225 stock index eventually bottomed out at 7603.76 in April 2003 before resuming an upward climb.
In the decades following World War II, Japan implemented stringent tariffs and policies to encourage the people to save their income. With more money in banks, loans and credit became easier to obtain, and with Japan running large trade surpluses, the yen was able to appreciate against foreign currencies. This allowed Japanese companies to invest in capital resources much more easily than their competitors making goods cheaper and widening the trade surplus further. And, with the yen appreciating, financial assets became very lucrative.
Unfortunately, with so much money readily available for investment, speculation was inevitable, particularly in the Tokyo Stock Exchange and the real estate market. The Nikkei stock index hit its all-time high on December 29, 1989 when it reached an intra-day high of 38,957.44 before closing at 38,915.87. The rates for housing, stocks, and bonds rose so much that at one point the government issued 100-year bonds. Additionally, banks granted increasingly risky loans.
At the height of the bubble, a commonly-quoted claim was that the land beneath the Imperial Palace in Tokyo was worth more than the entire state of California. Japan regained a sense of national pride and assertiveness as a result of its new power, which manifested itself in works such as The Japan That Can Say No by Shintaro Ishihara and SONY founder Akio Morita. Many outside Japan were alarmed by this resurgence, leading to criticism from foreign observers. Michael Crichton, for example, wrote Rising Sun at this time, which highlighted US concerns with the growing Japanese economic power
Prices were highest in Tokyo's Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime "A" property in Tokyo's financial districts were less than 1/100th of their peak, and Tokyo's residential homes were 1/10th of their peak,[citation needed] but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market
With Japan's economy driven by its high rates of reinvestment, this crash hit particularly hard. Investments were made increasingly out of the country, and Japanese manufacturing firms lost much of their technological edge. As Japanese products became less competitive overseas, the low consumption rate began to bear on the economy, causing a deflationary spiral.
The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many "zombie businesses
The time after the bubble's collapse (崩壊, hōkai?), which occurred gradually rather than catastrophically, is known as the "lost decade or end of the century" (失われた10年, ushinawareta jūnen?) in Japan. The Nikkei 225 stock index eventually bottomed out at 7603.76 in April 2003 before resuming an upward climb.
[i have gather information from wikipedia and other few internet articles]
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