Southeast Asia's Boom Is a Bubble-Driven Illusion?

Since the Global Financial Crisis, Southeast Asia has been one of the world’s few bright spots for economic growth and investment returns. With its relatively young population of 600 million and its growing middle class, Southeast Asia has been the scene of a modern-day gold rush as international companies clamor to get a piece of the action. Unfortunately, my research has found that much of this region’s growth in recent years has been driven by ballooning credit and asset bubbles – a pattern that is also occurring in numerous emerging economies across the globe.

In the past few months, I have published reports about the growing bubbles in Singapore, Malaysia, Thailand, the Philippines, and Indonesia, and I will use this report to explain the region’s economic bubble as a whole. My five Southeast Asian country reports have generated quite a bit of interest and controversy, and were read nearly 1.3 million times, and were publicly denied by the central banks of Singapore, Malaysia, and the Philippines.

Ultra-low interest rates in the U.S., Europe, and Japan, combined with the U.S. Federal Reserve’s $3 trillion-and-counting quantitative easing programs caused a $4 trillion torrent of speculative “hot money” to flow into emerging market investments from 2009 to 2013. A global carry trade arose in which investors borrowed significant sums of capital at low interest rates from the U.S. and Japan for the purpose of purchasing higher-yielding emerging market investments and earning the difference. The surging foreign demand for emerging market investments created bubbles in those assets, especially in bonds. The emerging markets bond bubble resulted in record low borrowing costs for developing nations’ governments and corporations, and helped to inflate dangerous credit and property bubbles across the emerging world.

The flow of hot money into Southeast Asia after the financial crisis caused the region’s currencies to rise strongly against the U.S. dollar, such as the Singapore dollar’s 22 percent increase, the Philippine peso and Malaysian ringgit’s 25 percent increase, the Thai baht and Vietnamese dong’s 30 percent increase, and the Indonesian’s rupiah’s 50 percent increase, which has been subsequently negated now that foreign capital has begun to flow out of Indonesia’s economy.

The post-Crisis bond bubble helped to reduce government bond yields in Singapore, Thailand, Indonesia, Malaysia, and the Philippines (click links for charts), while foreign institutional holdings of many Asian sovereign bonds increased dramatically:



Foreign direct investment into several Southeast Asian countries - particularly Singapore, Malaysia, and Indonesia – immediately surged to new highs after the Global Financial Crisis.
Here’s the chart of Singapore’s FDI (net inflows, current dollars):



Malaysia’s FDI (net inflows, current dollars):



Indonesia’s FDI (net inflows, current dollars):



How Record Low Interest Rates Are Fueling The Bubble

The emerging markets bond bubble helped to push EM corporate and government borrowing costs to all-time lows, but there is another factor that is causing the inflation of bubbles in Southeast Asia: record low bank loan rates. Large corporations have a choice to borrow from either the bond market or directly from banks, and typically choose the option that provides the lowest borrowing costs.

Western benchmark interest rates – particularly the LIBOR or London Interbank Offered Rate – are used to price bank loans in numerous countries throughout the entire world, and most have been hovering just above zero percent in the five years since the Global Financial Crisis. Most Western economies were hit extremely hard in the financial crisis and have faced a constant threat of falling into a deflationary trap since then, which is why their benchmark interest rates have been at virtually zero. In the U.S. Federal Reserve’s case, it has been running what is known as ZIRP or zero-interest rate policy.

Here is the chart of the LIBOR interest rate:



Due to the fact that the West was the primary epicenter of the 2003 to 2007 bubble economy and ensuing Global Financial Crisis, emerging market economies were able to rebound more quickly and continue growing at a much greater rate. While many Southeast Asian economies have been growing at a 5 percent or greater annual rate since 2008, they have been able to borrow at record low Western interest rates such as those based on the LIBOR. LIBOR is used as the base rate for nearly two-thirds of all large-scale corporate borrowings in Asia. Western interest rates are too low relative to Southeast Asia’s economic growth and inflation rates, so a large-scale borrowing binge has been occurring as a side-effect. Southeast Asia’s credit bubble may balloon even larger because Western benchmark interest rates are likely to stay at very low levels for several more years.

Local benchmark interest rates in many Southeast Asian countries have hit record lows since 2008 as well. Local interest rates are used for approximately one-third of large-scale corporate loans in Asia, as well as most consumer, mortgage, and smaller business loans. Southeast Asian central banks have kept their benchmark interest rates low to stem export-harming currency appreciation that has resulted from capital inflows since the financial crisis.

The chart below is Singapore’s benchmark interest rate, or SIBOR, which is commonly used as a reference rate for loans throughout Southeast Asia:



Here is Malaysia’s bank lending rate chart:


The Philippines’ bank lending rate:


Indonesia’s benchmark interest rate:

Thailand's benchmark interest rate:


Southeast Asia’s Boom Is Driven By A Credit Bubble

Abnormally cheap credit conditions have led to the inflation of credit bubbles across Southeast Asia, which have been a significant driver of the region’s economic growth in recent years.

Singapore’s total outstanding private sector loans have soared by 133 percent since 2010:




Malaysia’s private sector loans have increased by over 80 percent since 2008:


The Philippines’ M3 money supply, a broad measure of total money and credit in the economy, has more than doubled since 2008, and sharply accelerated in 2013 as interest rates hit new lows:


Indonesia’s private sector loans have risen by nearly 50 percent in the past two years:


Thailand’s private sector loans have risen by over 50 percent since the start of 2010:


Though dangerous credit bubbles are inflating across Southeast Asia, some countries’ credit bubbles are driven primarily by consumer or household debt, while others are driven mainly by commercial sector borrowing, particularly for construction and property development. Singapore, Malaysia, and Thailand’s credit bubbles have a significant household debt component as the chart below shows:

Denise Law, FT

Singapore’s household debt-to-GDP ratio recently hit nearly 75 percent, which is up from 55 percent in 2010 and 45 percent in 2005. Though Singapore’s total outstanding household debt has increased by 41 percent since 2010, the city-state’s household income and wages have increased by a mere 25 percent and 15 percent respectively.

Malaysia now has Southeast Asia’s highest household debt load after its household debt-to-GDP ratio hit a record 83 percent, which is up from 70 percent in 2009, and up from just 39 percent at the start of the Asian Financial Crisis in 1997. Malaysian household debt has grown by approximately 12 percent annually each year since 2008.

Thailand’s household debt-to-GDP ratio also hit a recent record of 77 percent, which is up from 55 percent in 2008, and just 45 percent a decade ago. Total lending to Thai households increased at a 17 percent annual rate from 2010 to 2012, while household credit provided by credit card, leasing and personal loan companies rose at an alarming 27 percent annual rate.

Property Bubbles Are Ballooning Across Southeast Asia 

Ultra-low interest rates in Southeast Asia have helped to inflate property bubbles throughout the region, which has also contributed to the staggering rise in household debt.

Singapore’s mortgage rates are based upon the SIBOR rate discussed earlier, which has been held at under one percent for over five years. Singapore’s property prices have roughly doubled since 2004, and are up by 60 percent since 2009 alone:


Source: GlobalPropertyGuide.com 

The average price of a new 1,000-square-foot condo has risen to $1 million to $1.2 million Singapore dollars ($799,000 to $965,638 U.S.), making the city-state the world’s third most expensive residential property market behind Canada and Hong Kong. A 2013 study by The Economist magazine showed that Singapore’s residential property prices are 57 percent overvalued based on its historic price-to-rent ratio. Singapore now ranks as one of the world’s ten most expensive cities to live.

Economic bubbles and the resulting false prosperity in other Asian countries have spilled over into Singapore as investors from across the region clamor to buy properties there. In 2013, 34 percent of foreign property-buyers in Singapore were from China, 32 percent were from Indonesia, and 13 percent were from Malaysia.

Total outstanding mortgages increased by 18 percent each year over the last three years, bringing total mortgage loans to 46 percent of Singapore’s GDP from 35 percent. Almost a third of Singapore’s mortgages are utilized for speculative property purchases rather than owner occupation. Singapore’s mortgage loan bubble is one of the primary reasons why the country’s household debt has been increasing at such a high rate in recent years.

Malaysian property prices have been increasing parabolically in recent years, as the chart below shows. Mortgage loans account for nearly half of all Malaysia’s household debt, and its rapid increase is the primary driver of the country’s household debt bubble.




Prices have nearly doubled in the past decade in certain Philippine property markets, such as the Makati Central Business District (CBD):



In the first six months of 2013, the average price of a 3-bedroom luxury condominium in Makati CBD rose by a frothy 12.92 percent (9.98 percent inflation-adjusted), after rising 5.6 percent in Q1 2013, 8 percent in Q4 and 8.3 percent in Q3 2012. The average price of a premium 3-bedroom condominium in Bonifacio Global City surged by 12.4 percent y-o-y, while secondary residential property prices in Rockwell Center rose by 10.6 percent y-o-y. Philippine outstanding mortgage loans are rising at an even faster rate than consumer credit, such as a 42 percent increase in 2012. The Philippines’ construction sector is expected to expand by double digits in 2014 and account for nearly half of economic growth thanks in large part to the country’s property development boom.

Though Indonesian property market data is spotty and difficult to source for all markets, Jakarta and Bali property prices are becoming frothy, especially at the higher end of the market. Jakarta condominium prices rose between 11 and 17 percent on average between the first half of 2012 and 2013, after rising by more than 50 percent since late 2008. Luxury real estate prices in Jakarta soared by 38 percent in 2012, while luxury properties in Bali rose by 20 percent – the strongest price increases of all global luxury housing markets.  A small two-room apartment on the outskirts of Jakarta can cost nearly $80,000 USD (RM253,373), making housing unaffordable for many ordinary Indonesians. From June 2012 to May 2013, outstanding loans for apartment purchases nearly doubled from IDR 6.56 trillion (USD $659.3 million) to IDR 11.42 trillion (USD $1.15 billion).

Thailand’s property bubble is centered primarily in the condo market, which is the most common type of dwelling for Bangkok residents, and is the speculative vehicle of choice for foreign investors who typically hail from Singapore and Hong Kong. According to Bank of Thailand, condo prices soared by 9.39 percent, while townhouses prices rose by 6.86 percent in Q1 2013, after rising by similar amounts for the past several years. The majority of new mortgages originated are concentrated at the lower end of the Thai housing market, and Bank of Thailand warned that low interest rate home loans could cause a property bubble.

Boonchai Bencharongkul, a wealthy Thai industrialist, said “I think the current situation is worrisome. As one of those who had such an experience, I can smell it now. People are rushing and competing to buy condos while more and more people are driving Ferraris. These are the same things we saw before the 1997 crisis occurred.”

Construction Bubbles Abound Across Southeast Asia

Low interest rates and soaring property prices create the perfect conditions for construction bubbles, which is what occurred in Ireland, Spain, the United States, and other countries from 2003 to 2007, and what has been occurring throughout Southeast Asia in recent years. Construction is a capital-intensive economic activity that benefits from cheap and easy credit, which is certainly the case in Southeast Asia. Southeast Asia’s construction boom has been focused on condominium and residential property development, hotels, resorts, casinos, malls, airports, infrastructure projects, and skyscrapers.

Construction has been the most significant contributor to Singapore’s economic growth since 2008, as the chart below shows:



Construction industry work permits rose to 306,500 in June 2013 from 180,000 at the end-2007, which was the peak of Singapore’s economic boom before the financial crisis hit. Singapore’s construction boom has been driving an over 18 percent annual increase in total outstanding building and construction loans in recent years. Bank loans for building and construction, and mortgages recently rose to 79 percent of Singapore’s GDP, which is up from 62 percent in 2010.

Casino and resort construction has become a strong driver of building activity ever since gambling became legal in Singapore in 2010. The Marina Bay Sands and Resorts World Sentosa opened in 2010 at a cost of over $10 billion. Singapore has also been aggressively upgrading and expanding its Changi International Airport, which has been a driver of construction activity. There is so much construction activity in Singapore that the country has 306,500 construction workers (compared to its 5.3 million population) from other Asian countries living there on work permits.

After growing by over 20 percent in 2012, Malaysia’s construction spending was expected to rise by 13 percent in 2013. Malaysia’s plan to build the tallest building in Southeast Asia, the 118-story Warisan Merdeka Tower, are a major red flag according to the Skyscraper Index, which posits that ambitious skyscraper projects are a common hallmark of economic bubbles.

In the Philippines, casinos, condominiums, and shopping malls have been driving construction activity. The Philippines now hosts 9 of the world’s 38 largest malls – beating even the U.S., China, and most other developed countries. The Philippines’ construction sector is expected to expand by double digits in 2014, and account for nearly half of the country’s economic growth.

Indonesia has been experiencing a construction boom in every sector, including hotels, condominiums, infrastructure, airports, and government buildings. At least 61 new hotels are confirmed to open in Jakarta by 2015. Indonesian construction contracts were estimated at more than $40 billion in 2013, up from $32.4 billion in 2012.

Thailand’s construction boom has been centered upon condominium development and infrastructure projects, which are funded by the government’s deficit spending. Construction spending is expected to grow by nearly 7 percent annually for the next five years.

Governments Are Borrowing To Create Economic Growth

The governments of Thailand and Malaysia have been taking advantage of low borrowing costs – courtesy of the emerging markets bond bubble – to finance deficit spending for the purpose of boosting economic growth.

Since 2010, Malaysia’s public debt-to-GDP ratio has been at all time highs of over 50 percent due to large fiscal deficits that were incurred when an aggressive stimulus package was launched to boost the country’s economy during the Global Financial Crisis. Malaysia now has the second highest public debt-to-GDP ratio among 13 emerging Asian countries according to a Bloomberg study. Malaysia’s high public debt burden led to a sovereign credit rating outlook downgrade by Fitch in July.

Malaysia’s Malaysia's government has been running a budget deficit since 1999:


Thailand’s government spending ramped up significantly in 2012 after the launch of a $2.5 billion first car tax rebate program that was fraught with problems as well as an unsuccessful rice subsidy scheme that lost the government 136 billion baht or $4.4 billion even though it was promoted as cost-neutral. Thailand’s government also plans to spend 2 trillion baht ($64 billion) – nearly one-fifth of the country’s GDP – by 2020 on growth-driving infrastructure projects, including a network of high-speed railway lines to connect the country’s four main regions with Bangkok. The interest alone on this new debt will cost another 3 trillion baht over the next five decades.

Thailand’s government spending is up by nearly 40 percent since 2008:

The country’s government has been running a budget deficit since 2008 to support its spending:



A wealthy Thai industrialist, Boonchai Bencharongkul, warned against excessive government spending, saying “This time, the nature of the crisis might be different. Last time it was the private sector that went bankrupt, but this time we might see the government collapse.” Sawasdi Horrungruang, founder of NTS Steel Group, cautioned that Thailand’s government should not borrow beyond its ability to service its debt, which will eventually become the burden of taxpayers.

How Singapore’s Financial Sector Is Driving The Bubble

Singapore has grown to become Southeast Asia’s banking and financial center, and the region’s rise – and inflating economic bubble – in recent years has helped the city-state to earn the nickname “The Switzerland of Asia.” Singapore’s financial sector is now six times larger than its economy, with local and foreign banks holding assets worth S$2.1 trillion (US$1.7 trillion). The Singaporean financial sector’s assets under management (AUM) have increased at a 9 percent annual rate from 2007 to 2012, but surged 22 percent in 2012. The primary reason for the country’s rapid AUM growth is its growing role as a banking hub in Southeast Asia, and it has been riding the coattails of the region’s economic bubble. A full 70 percent of assets managed in Singapore were invested in Asia in 2013, which is up from 60 percent in 2012. Singapore’s financial services industry grew 163% between 2008 and 2012.

Singapore’s banks have been contributing to the inflation of Southeast Asia’s economic bubble due to their use of the abnormally-low SIBOR as a reference rate for loans made throughout the region.

Here is the chart of the SIBOR interest rate as a reminder of how low it has been for the past half-decade:



To learn more about Singapore’s financial sector and its role in inflating Southeast Asia’s economic bubble, please read this section of my detailed report about Singapore’s bubble economy.

How China Is Driving Southeast Asia’s Bubble

Economic bubbles are not confined to Southeast Asia, unfortunately; since 2008, China’s economy has devolved into a massive economic bubble that has been contributing to Southeast Asia’s bubble.
Here are a few statistics that show how large China’s bubble has become:

• China’s total domestic credit more than doubled to $23 trillion from $9 trillion in 2008, which is equivalent to adding the entire U.S. commercial banking sector.
• Borrowing has risen as a share of China’s national income to more than 200 percent, from 135 percent in 2008.
• China’s credit growth rate is now faster than Japan’s before its 1990 bust and America’s before 2008, with half of that growth in the shadow-banking sector.

As mentioned at the beginning of this report, China’s government has encouraged the construction of countless cities and infrastructure projects to generate economic growth. Many of China’s cities, malls, and other buildings are still completely empty and unused even years after their completion, as these eerie, must-see satellite images show.

China has a classic property bubble that has resulted in soaring property prices in the past several years. A recent report showed that property prices increased 20 percent in Guangzhou and Shenzhen from a year earlier, and jumped 18 percent in Shanghai and 16 percent in Beijing.

China’s inflating economic bubble has generated an incredible amount wealth (albeit much of it temporary), a portion of which has flowed into Southeast Asia. Wealthy Chinese have been buying condominiums in desirable locations across Southeast Asia, and its notoriously free-spending gamblers are the primary reason for the casino building boom in numerous Southeast Asian countries, particularly in Singapore and the Philippines. Chinese companies have been investing and lending heavily in Southeast Asia, with a strong focus on the natural resources sector.

From 2002 to 2012, China’s bilateral trade with Southeast Asia increased 23.6 percent annually, and China is now Southeast Asia’s largest trade partner, while Southeast Asia is China’s third-largest trade partner.

Though several lengthy books can be written about China’s rise, economic bubble, and how it affects Southeast Asia, my goal is to succinctly show how dangerous China’s economic bubble has become and emphasize the fact that Southeast Asia’s economy has been benefiting from China’s false prosperity. The eventual popping of China’s bubble will send a devastating shockwave throughout Southeast Asia’s economy, which will contribute to the ending of the region’s bubble economy.

The Role Of Southeast Asia’s Frontier Economies

This report has focused primarily on the larger, more developed Southeast Asian countries because they have a far greater influence on the region’s economy compared to the “frontier” economies of Vietnam, Cambodia, Laos, and Burma (Myanmar). The five largest Southeast Asian economies also have more advanced financial markets that are better integrated with global financial markets, and thus pose a greater systemic financial risk than the region’s frontier economies.

Southeast Asia’s frontier economies have been growing rapidly in recent years for many of the same reasons as their more developed neighbors, including:

• Rising trade with China
• Rising Chinese investment
• Increasing intraregional trade
• Loose global monetary conditions and “hot money”
• Higher commodities prices
• Credit and property bubbles

Vietnam experienced a property and credit bubble that popped several years ago and saddled the country’s banking system with bad loans. International realty firm CB Richard Ellis warned last year that Phnom Penh, Cambodia was experiencing a property bubble. Some local observers have suspected that property prices in Vientiane, Laos were in a bubble. Property prices in Yangon, Burma have exploded higher in recent years making commercial rents more expensive than in Manhattan.

While relevant data is few and far between, it is not unreasonable to believe that Southeast Asia’s frontier economies are experiencing froth or bubbles of their own for the same reasons as larger economies in the region. Vietnam, Cambodia, Laos, and Burma are dangerously exposed to the eventual popping of China’s economic bubble as well as the popping of Southeast Asia’s overall bubble.

Cracks Are Beginning To Show

Southeast Asia’s financial markets were strong performers in late-2012 and early-2013 until news of the U.S. Federal Reserve’s QE taper plans surfaced in the Spring of 2013, causing many of these markets to fall sharply due to fears of reduced stimulus. This rout did not come as a surprise to me as I had been warning that hot money flows were inflating asset bubbles in emerging market countries, and I even published a report titled “All The Money We’re Pouring Into Emerging Markets Has Created A Massive Bubble” just a few months before these markets plunged. The sensitivity of emerging market asset prices and currencies to the U.S. Federal Reserve’s stimulus programs was an additional confirmation that the emerging markets bubble owed its existence largely to hot money flows. The ultimate ending of the Fed’s current “ QE3″ program – which many economists expect this year – is likely to put further pressure on emerging markets and contribute to the popping of their bubbles.

While most of Southeast Asia’s financial markets and currencies have been treading water since last Spring’s taper panic, Indonesia’s situation has continued to deteriorate, causing the rupiah currency to significantly weaken due to capital outflows. The rupiah is down by nearly 50 percent from its 2011 peak. Indonesia was hit harder by the taper panic than other Southeast Asian countries because of its worsening trade and current account deficits.

Thailand has been embroiled in political turmoil in recent months as opposition protestors have been demanding the resignation of Prime Minister Yingluck Shinawatra. Opposition members claim that Yingluck is carrying on the same corrupt practices as her billionaire brother, former Prime Minister Thaksin Shinawatra, who was ousted in a military coup in 2006. The protests have harmed Thailand’s tourism industry, which is expected to slow 2014 economic growth to half of what it would have been without the demonstrations. Thailand’s stock market has fallen sharply in recent months as a result of the political strife.

How Southeast Asia’s Bubble Will Pop

Southeast Asia’s economic bubble will most likely pop when the bubbles in China and emerging markets pop and as global and local interest rates eventually rise, which are what inflated the region’s credit and asset bubbles in the first place. Southeast Asia’s bubble economy may continue to inflate for several more years if the U.S. Fed Funds Rate, LIBOR, and SIBOR continue to be held at such low levels.

I expect the ultimate popping of the emerging markets bubble to cause another crisis that is similar (though not identical in every technical sense) to the 1997 Asian Financial Crisis, and there is a strong chance that it will be even worse this time due to the fact that more countries are involved (Latin America, China, and Africa), and because the global economy is in a much weaker state now than it was during the booming late-1990s.

I recommend taking the time to read my detailed reports on Singapore, Malaysia, Thailand, the Philippines, and Indonesia to get a better understanding of Southeast Asia’s economic bubble.

In the coming months, I will be publishing more reports about bubbles that are developing around the entire world – most of which you probably never knew existed. Please follow me on Twitter, Google+ and like my Facebook page to keep up with the latest economic bubble news and my related commentary.

By Jesse Colombo, Forbes Contributor

I'm an economic analyst who is warning of dangerous post-2009 bubbles

 Related posts:
1. Asian central banks fix the mess created by their governments 

2. US Fed tapering of bond purchases, a new economic boom or bust cycles?

Asian central banks fix the mess created by their governments

Tokyo: Asia's central bankers are being forced to juggle their day jobs with what their governments have failed to do - steeling their economies for the hard times.

Critics say many governments have done too little to remove barriers to domestic and foreign business investment, cut red tape, upgrade infrastructure and develop deep, well-functioning financial markets when the region was flush with cheap money.

Now that economic rocks are emerging as the tide of the Fed's easy cash recedes, central banks are having to step in, detouring from their price and financial stability mandates, to shore up weak economies.

India and Indonesia were first in the firing line of investors last year when the Fed's plans to scale back its $85 billion in monthly cash injections started to take shape. Both took emergency steps, intervened in markets and raised interest rates to shore up battered currencies.

Since then the Fed has started winding down its stimulus in earnest, putting emerging markets on the back foot once again as investors look to target the most vulnerable economies.

Indonesian and Indian authorities have improved their defences against rapid outflows but their governments have failed to tackle supply bottlenecks and market rigidities that fuel inflation and limit room for policy manoeuvre, economists say. Both face national elections this year that could lead to populist measures and further delay reforms.

In Thailand, months of political turmoil have paralysed government, leaving the central bank as the mainstay of economic support.

"Government and monetary policies should be fairly balanced," says Rob Subbaraman, chief Asia economist at Nomura in Singapore.

"In India, and increasingly Thailand, the governments have not done their part. There's a risk Indonesia goes this way as the elections draw closer," said Subbaraman, who since mid-2013 has been warning of emerging Asia's growing exposure to market turmoil.

Even in Japan and China, with their strong and stable political leaderships, central banks appear to be doing most of heavy lifting.

In Japan, a blast of central bank money has boosted the economy and markets, but Prime Minister Shinzo Abe's economic reforms have disappointed.

China's central bank is trying to rein in an explosion of off-balance sheet and risky lending as cautious government regulators resist speedier financial reform that would force markets to price risk more realistically.

Asian central bankers rarely air their frustrations in public. India's former central bank governor Duvvuri Subbarao was an exception, regularly sparring with New Delhi over economic reforms and rates.

Sometimes though, their concerns do bubble to the surface.

After a series of rate hikes by Indonesia's central bank, an official there in October voiced his vexation that the government was not tackling the root cause of a widening trade and current account gap - its own spending.

"We need to address the cause of illness when running a fever," Dody Budi Waluyo, executive director of Bank Indonesia economic and monetary policy department told Reuters at the time. "The medicine should not only be Panadol to lower the fever."

NEW RISKS

In picking up the reins from government, the risk is that central banks will deliver neither the stability they seek, nor the economic support that is needed.

In Japan, for example, the concern is that optimism spurred by the Bank of Japan's massive cash injections will fade without reforms to unshackle the economy's untapped growth potential and help overcome the problems of a fast ageing society.

The Chinese central bank's attempts to curb risky lending by calibrating supply of money market funds have triggered repeated cash crunches that threaten to ignite market panic.

Indonesian and Indian central banks may be forced to tighten monetary policy more than their slowing economies would otherwise have warranted because of fragile market sentiment and sticky inflation that remains high even when growth cools.

In an ominous sign for India, foreign investors have been net sellers of the country's stocks this year.

Thailand's central bank is under pressure to fill the void left by stalled infrastructure spending and provide the struggling economy with stimulus, but is well aware of the risks.

"Maintaining monetary policy in an accommodative mode for a long period of time runs the risk of delays in reforms as they may seem less pressing and the risk of financial imbalances build up," Bank of Thailand spokeswoman Roong Mallikamas said.

In Japan, one concern is that without fundamental reforms promised as part of Abe's "Abenomics" revival plan, markets will reverse and Japan lurch back into its deflationary equilibrium or "stagflation" - a spell of tepid growth and rising prices. Japan Risk Forum, which groups risk managers from Japan's major financial institutions, sees nearly a 50-50 chance of that happening.

"We cannot rely solely on monetary policy forever and the time will come when the government's resolve will be tested by markets, likely around summer," said Hiroshi Watanabe, head of state-run lender JBIC and Japan's former top financial diplomat.

OWN MAKING

To be fair, central bankers may have contributed to their own predicament by keeping monetary policies too loose for too long after the global financial crisis, either because of political pressure or fear of more turmoil.

Nomura estimates that taken as a whole, real interest rates measured as a difference between official rates and inflation in Asia's 10 biggest economies excluding Japan were negative for more than half the time since 2008 - a recipe for rapid debt buildup and property and stock market bubbles. By contrast rates were negative for only 16 percent of the 1996-2007 period.

"By over accommodating the Fed's easing, central banks allowed asset price inflation to occur, causing an intoxicating party in full swing," said Thirachai Phuvanatnaranubala, former Thai finance minister and deputy central bank governor. "With tapering, the party is over. Some emerging markets will now have to deal with the bubbles that crept up while everybody dreamily enjoyed himself."

There are also some signs of change. India is embarking on an ambitious monetary policy overhaul that would make it harder for the government to lean on the central bank, while the government has curbed gold imports and secured $34 billion in overseas financing to try to close its current account deficit.

Indonesia's ban on ore exports drew fire, but it is a sign Jakarta at least recognises the need to reduce its reliance on raw commodities exports. It has also taken steps to shore up public finances.

Still, central bank efforts can easily unravel once elections are in motion, said Toru Nishihama, senior emerging markets economist at Dai-ichi Life Research Institute in Tokyo.

"As elections are looming in many emerging countries this year, no matter how central banks tighten policy to control inflation, their governments are tempted to loosen fiscal policy, offsetting central banks' efforts," Nishihama said.

Sources: Reuters

Related posts:
1.  Challenging times for central banks all over the world to rejuvenate global economy
2.  US Fed tapering of bond purchases, a new economic boom or bust cycles?
3. An utterly unrepentant Japan opening up past wounds derail peace diplomacy

How and what the 12 zodiac signs will fare in Horse Year holds?

Renowned geomancer Jane Hor gives the low-down on how the 12 zodiac signs will fare in the Year of the Horse.

Rat (1936, 1948, 1960, 1972, 1984, 1996, 2008)

This year the Rat clashes with the Grand Duke. People born under this zodiac sign are likely to meet with changes in romance, career or their living environment. Changes can be good or bad, depending on the individual’s birth date and time, and other factors.

The Rat has to be vigilant as there are many inauspicious stars that will fly into their destiny palace.

They may encounter many obstacles in their career. Even slight negligence may result in wasted effort.

Avoid lavish spending to curb cash-flow problems.

You are on an emotional roller-coaster. Release your negative emotions wisely and beware of unscrupulous people around you.

You are prone to accidents and injuries this year. Be extra careful in outdoor activities, especially those involving heights.

Ox (1937, 1949, 1961, 1973, 1985, 1997, 2009)

This will be a prosperous year with plenty of opportunities. You may take on a high position, thanks to two powerful and auspicious stars.

Do not get carried away with success, though, or you may evoke jealousy from your colleagues, and end up with more foes than friends.

You should not have problems with wealth this year, and enjoy a steady income. Your investments will reap profits, too.

Invest wisely, work hard and avoid gambling.

Where relationships are concerned, be more understanding and tolerant towards your partner. Health-wise, watch your diet: avoid cold and raw food.

In 2015 (Year of the Goat), the Ox will clash with the Grand Duke directly. Your luck-flow will be in a turbulent state. Make preparations to face bad times next year.

Tiger (1938, 1950, 1962, 1974, 1986, 1998, 2010)

Your luck-flow is not significantly good as you have no auspicious stars. Stay vigilant and calm and you should be safe.

Career-wise, you have to deal with villains around you as there are lots of inauspicious stars surrounding you. Be on high alert as it is already difficult for you to dodge gossip and back-stabbing from unscrupulous people who will try to cause you “severe damage”.

Guard your job because there could be people who want to grab your rice bowl, or steal your credit.

Your financial luck is weak this year. Avoid gambling and making investments.

Love is elusive, so be patient.

Health-wise, be extra careful while on the road. Watch out for sprains and other physical injuries.

Rabbit (1939, 1951, 1963, 1975, 1987, 1999, 2011)

The Rabbit will enjoy many pleasant opportunities as they have many auspicious stars.

This is a good time to develop your career and realise your ambitions. The road to success is not without obstacles but you will eventually overcome them.

Beware of your tongue because you can get into trouble and cause dispute and bickering among your friends and colleagues.

This is also a good year for diversified investments but do so within your means.

This year, with the Ox, you will have plenty of opportunities for romance. You may have a short-term but memorable affair.

Beware of scandals and illicit relationships.

The married Rabbit who is planning to have a baby this year will have a high chance of conceiving.
Health-wise, do not indulge in wine. Also, pay attention to the health of elders in the family.

Dragon (1940, 1952, 1964, 1976, 1988, 2000, 2012)

You have opportunities to stand out in your career, but you have to be wary of how you handle social interactions. Avoid creating conflict with your colleagues and do not offend your superior. Your luck in wealth will fluctuate because of an inauspicious financial star, which may cause you to overspend and burst your budget.

Avoid gambling and high-risk investments or you may suffer serious financial losses.

Your love life remains stagnant and there is no significant breakthrough. The opportunity for a relationship is very slim.

Health-wise, beware of dangers on the road. This year, you are more prone to car- and water-related accidents. Avoid participating in water-related sports (swimming or scuba-diving) as you may encounter accidents and get injured easily. For those with children, pay attention to them to prevent accidents and injuries.

Snake (1941, 1953, 1965, 1977, 1989, 2001, 2013)

Your luck-flow turns positive this year as there are auspicious stars. Career-wise, you will be busier than before. Rewards and promotion will come your way, especially for white-collar workers.

However, you have to be cautious because there are a few inauspicious stars surrounding you that hinder your career development.

Your motto this year should be, “Action speaks louder than words”. Remember to put in extra effort to secure your promotion and increment.

Guard your wealth closely as it could come, and go, very quickly, especially your personal possessions. This year, you may lose your wallet.

Romance has its ups and downs, so manage your emotions.

Take good care of your health as you may easily fall sick. Get more exercise and rest to prevent serious illness.

Horse (1942, 1954, 1966, 1978, 1990, 2002)

The Grand Duke is sitting in the middle, so, if there is no celebration, there shall be calamities. Therefore, those born in the Year of the Horse may get into trouble easily this year.

If there is some celebration in the family, you might be able to avert calamities, but still you have to be on high alert.

Think before you leap as you are said to be offending the “yearly Grand Duke”. You may feel lost and moody and may make the wrong decisions. Avoid making decisions when you are in an unstable state of emotion, to avoid unwanted calamities.

There are many inauspicious stars hindering you from leading a better life.

Have more communication with your superior, clients or peers, as it could bring you surprising results.

Love-wise, you tend to feel depressed at times, and often find yourself eaten up by jealousy and fury.

Your health needs attention and you should beware of accidents. Donate blood or get a dental scaling in lunar May and November.

Be careful of food hygiene or you may experience food poisoning.

Overall, you are advised not to be too pessimistic and to exercise more caution when making decisions.

Try to travel as you may think more clearly after a short break.

Goat (1943, 1955, 1967, 1979, 1991, 2003)

The Grand Duke shall be your good friend this year and you will have excellent interpersonal relationships.

The Goat will enjoy good luck and bright prospects in their career, especially in jobs that require constant contact with people.

An auspicious star flies into your destiny palace; you may easily get help from your male peers. You have chances of a promotion or an increment.

Keep a low profile and be humble.

There are a few inauspicious stars surrounding you, which means that there are unscrupulous people (especially females) who will try to sabotage you and hinder your career development.

Your wealth is stable – you can expect a tidy sum from your mainstream income and also returns from your investments.

Spend and shop wisely because there is an inauspicious star that will cause you to spend lavishly, thus draining your wealth.

You will enjoy favourable relationships with people around you. Be careful of becoming overly friendly with the opposite sex. A third party may cause conflicts.

Health-wise, you may suffer from minor illnesses but that should not be too much of a concern.

Monkey (1932, 1944, 1956, 1968, 1980, 1992, 2004)

You will face numerous obstacles in your career. Very often, things do not progress smoothly because of the deliberate misconduct of some people around you. Do not be disheartened but be optimistic and pro-active. Never give up halfway or you will end up nowhere.

Career-wise, this is a year for conservative defence rather than aggressive attack.

Watch how you spend your money and avoid taking loans.

Health-wise, besides paying close attention to your physical and psychological well-being, take good care of the elders in your family. Go for regular check-ups as a preventative measure.

Rooster (1933, 1945, 1957, 1969, 1981, 1993, 2005)

The Rooster will enjoy a great performance in career. Although there are “risks and traps”, you will receive help from good people around you. When in doubt, seek advice and help from your seniors, especially women.

Pay close attention to your investment and wealth management to avoid major financial crises.

In terms of your love life, you may have many chances to meet many friends and some of them are your noblemen. For those romantic partners who are still in love, this is a good year to get married. Singles have good opportunities to meet the right partner.

Health looks good this year and shouldn’t be much cause for concern.

Dog (1934, 1946, 1958, 1970, 1982, 1994, 2006)

The Dog can easily receive help from people around them this year. This year, Dog people may have an excellent performance in career. If the nature of your work requires keen thinking (interior designer, composer or scripwriter), this year, you are full of creativity and have a high chance of climbing the career ladder. However, keep yourself in check. Do not become arrogant or you may lose the support of your friends.

Your wealth looks good this year. Both your mainstream income and other sources of income will yield returns.

Although you have lots of chances to meet people of the opposite sex through your career, romance won’t bloom and you will feel very lonely. Try to share your feelings with your partners or family members. Or join more group activities or learn something new to fill the emptiness.

Be aware of food hygiene as you may have food poisoning this year.

Pay attention to your own safety; you may encounter accidents or suffer injuries.

Pig (1935, 1947, 1959, 1971, 1983, 1995, 2007)

Last year, the Pig people had a clash with the Grand Duke. In the first half of this year, you are still affected by the clash. You have to be persistent, calm and patient in facing all your problems.

After autumn, your condition will improve, especially if you are in marketing or a job that requires you to liaise constantly with people. Career-wise, seek help when the need arises. Do not persist alone or you may end up a complete failure.

This year, you have a “minor depletion” star that will see you indulge in spending on luxury goods. You have to control your urge to spend, to avoid overspending. Besides your usual savings, guard your assets well to prevent theft or robbery.

Your health is poor this year, so be wary of contracting illnesses. Ensure you get enough rest to avoid falling sick. – Majorie Chiew The Star

Related posts:

• Cheeky equine greetings of the Horse 2014: ma shan...
• Good things on the trot in Year of the Horse for 2014

Cheeky equine greetings of the Horse 2014: ma shang you…

The messages for the New Year convey people’s hopes and goals along with a sassy sense of humour.

 

ma shang

HAPPY Chinese New Year! On this very first day of the Year of the Horse, let’s take a look at the New Year greetings that have swept cyberspace before the Snake could make a slithering exit.

A phrase that begins with ma shang you… is popularly used in the context of Chinese New Year wishes.

Separately, ma means “horse” while shang means “above”. When combined, the two characters form an adverb that means “immediately” or “right away”. Literally, however, they can denote “on horseback”.

Meanwhile, ma shang you… means “get (something) immediately”.

The common greetings include ma shang you qian, ma shang you fang and ma shang you che hao, which mean “get rich immediately”, “own a house immediately” and “obtain a car licence plate immediately” (from the compulsory licence plate lottery before one can own a car, a measure to curb traffic congestion).

Accompanying these phrases are illustrations of horses with ingots, bank notes, houses or cars on their back.
Another cheeky example shows a pair of mini elephants sitting on the back of a horse.

It is used to express a wish of finding a partner in the New Year as the Chinese term for partner, dui xiang, is literally a pair of elephants.

But what if a person wants it all — money, house, car and everything?

Just place an eggplant on the back of a horse because eggplant or qie rhymes with everything in Chinese.

On Taobao, China’s version of eBay, snuggly horse soft toys are currently selling like hot cakes. Many come with eggplants, elephants, money and houses, while others have chariots from Chinese chess to represent cars.

But there are party poopers who have pointed out that horses have a layer of hair, mao, and thus ma shang you… becomes ma shang you mao. The phrase means “have nothing”, which dashes one’s dreams of getting anything at all.

Jokes aside, these ma shang you… phrases can be summarised into one conclusion — the people’s earnest wish for a better life in the brand new year.

According to China Women’s News, this ma shang you… trend is not a new invention.

Traditional decorative items have been found adorned with the illustration of a monkey on horseback, as the Chinese character for monkey, hou, is homophonic to an honorific title in ancient times.

When asked to analyse the ma shang you… trend in the local media, Xia Xueluan, a professor of sociology at Peking University, said that it was a reflection of people’s anxiety in the face of housing and marriage issues in real life.

“It also brings out their aspirations and expectations. Through expressing their hopes boldly, they are setting a goal for themselves and then working hard towards achieving it,” he said.

On that note, here’s wishing you a joyful celebration with friends and family. May the masculine beast bring you whatever your heart desires on its back. Gong Xi Fa Cai!

Contributed by:  by Tho Sin Yi Check-in China
The views expressed are entirely the writer’s own.
 
Related post:

Good things on the trot in Year of the Horse for 2014

Good things on the trot in Year of the Horse for 2014

The noble horse should bring luck and harmony to those who make the proper observances.

WE are four days away from ushering in the Chinese New Year and I’m swamped with queries from readers as to how they can improve their luck and prosperity in the Year of the Horse.

Local and foreign geomancy experts have been giving varying views about this year’s outlook.

Several astrologers and feng shui experts have predicted the Year of the Horse to be a better year than the previous one and there are some who have forecast financial struggles and challenges.

Some people attribute their successes and windfalls to feng shui and spiritual practices and there are groups who relate them to hard work and coincidences.

The horse, the seventh animal in the Chinese zodiac, embodies characteristics such as strength, perseverance, speed, purity and loyalty. – EPA

So which philosophy is correct, or which one do we follow?

It depends on which faith system (Chinese or Indian) you observe.

I spoke to several experts recently on the subject of metaphysics to get some insight on the different schools of philosophy.

Feng shui consultant Henry Fong from Kuala Lumpur said that if one wants to have better luck and harmony in the Year of the Wood Horse, they would have to follow the orientation of certain things in their home.

For dwellers living in a house that is facing south, he said, they should not carry out renovations or they would activate Tai Sui, which would create problems for the occupants.

(Tai Sui refers to stars directly opposite to Jupiter. They influence the Chinese zodiac, and are involved in religious Taoism and feng shui.)

Fong urged people not to renovate the north sector for fear of triggering the three killing energies resulting in obstacles, disaster and robbery.

He said, however, that it would be good to occupy and spend time in the north, south and south-west sectors.

Fong said the north-west and east sectors should be avoided and if they are unable to do so, they should place metal items there to neutralise the negative energies that can lead to health problems.

Luck and fortune according to Indian vedic astrology is determined by the placement of the nine planets on an individual’s birth chart based on the date, month, year and time of birth.

According to Vasthu Sastra consultant and astrologer Master Yuvaraj Sowma from Chennai, luck and fortune are uncontrollable and people only get what they deserve based on their astrology and not what they desire.

He agrees that luck can be induced through spiritual practices like performing specific rituals to woo the energy of positivity.

Yuvaraj said the first six months of this year would produce better results than the second half.

From the Chinese almanac, the horse is naturally lucky when it comes to finance and career; meaning those born in the Year of the Horse will enjoy a better period.

To enhance destiny, luck symbols are made available in feng shui because of the belief that such products help chi flow gracefully through rooms, homes and offices.

Energy consultant and author Janarrdhana Guptha from India promotes good luck symbols as an effective way to manifest things that an individual wants to attract into his or her life.

According to him, symbolism is popular in almost every culture and symbols impact our subconscious mind, stimulate confidence and offer good outcomes.

“When the geometric shape, size, meaning and their other nuances are properly understood and activated, it results in transmission of energy which is the vital force that governs everything in the universe.

“Chi has the power to alter and amplify energy flow in any space,” said Guptha, who is the author of Guide To Feng Shui Good Luck Symbols.

He said the end result of using good luck symbols, charms, amulets and talismans is that they create an environment rich with positive energy that produces positive thinking, focused minds and confidence, and removes blockages.

In order for symbols to produce the anticipated results, the products should be cleansed and energised before use.

As for horse figurines, Guptha said the Chinese have always associated it with gifts given to emperors.

The horse is the seventh animal in the Chinese zodiac and it embodies noble characteristics such as strength, perseverance, speed, purity and loyalty.

For those who wish to have their talents and hard work acknowledged by their superiors, Guptha said they should place a flying horse figure in the south of their homes.

The horse statuette is ideal for those who are in marketing or the travel industry, and are frequent travellers.

Vasthu Sastra talk and astrology talk

T. Selva will present a talk on ancient secrets, Vasthu Sastra and the astrology forecast for 2014 from 3pm to 5pm on Feb 15 at Universiti Tunku Abdul Rahman (Utar), Jalan Universiti, Bandar Barat, Kampar, Perak. Admission is free. To register, call 012-329 9713.

Contributed by T. Selva
> You can follow T. Selva on twitter@tselvas and write to him at tselvas@thestar.com.my. This column appears on the last Sunday of every month.

 T. Selva is the author of the Vasthu Sastra Guide and the first disciple of 7th generation Vasthu Sastra master Yuvaraj Sowma from Chennai, India.

US Fed tapering of bond purchases, a new economic boom or bust cycles?

Is a new economic crisis at hand?

The two-day sell-off of currencies and shares of several developing countries last week raises the question of whether this is the start of a new financial crisis.

AT the end of last week, several developing countries saw sharp falls in their currency as well as stock market values, prompting the question of whether it is the start of a wider economic crisis.

The sell-off in emerging economies also spilled over to the American and European stock markets, thus causing global turmoil.

Malaysia was not among the most badly affected, but the ringgit also declined in line with the trend by 1.1% against the US dollar last week; it has fallen 1.7% so far this year.

An American market analyst termed it an “emerging market flu”, and several global media reports tend to focus on weaknesses in individual developing countries.

However, the across-the-board sell-off is a general response to the “tapering” of purchase of bonds by the US Federal Reserve, marking the slowdown of its easy-money policy that has been pumping billions of dollars into the banking system.

A lot of that was moved by investors into the emerging economies in search of higher yields. Now that the party is over (or at least winding down), the massive inflows of funds are slowing down or even stopping in some developing countries.

The current “emerging markets sell-off” is thus not explained by ad hoc events. It is a predictable and even inevitable part of a boom-bust cycle in capital flows to and from the developing countries, coming from the monetary policies of developed countries and the investment behaviour of their investment funds.

This cycle, which is very destabilising to the developing economies, has been facilitated by the deregulation of financial markets and the liberalisation of capital flows, which in the past was carefully regulated.

This prompted bouts of speculative international flows by investment funds. Emerging economies, having higher economic growth and interest rates, attracted investors.

Yilmaz Akyuz, chief economist at South Centre, analysed the most recent boom-bust cycles in his paper Waving or Drowning?

A boom of private capital flows to developing countries began in the early 2000 but ended with the flight to safety triggered by the Lehman collapse in September 2008.

The flows recovered quickly. By 2010-12, net flows to Asia and Latin America exceeded the peaks reached before the crisis. This was largely due to the easy-money policies and near zero interest rates in the United States and Europe.

In the United States, the Fed pumped US$85bil (RM283bil) a month into the banking system by buying bonds. It was hoped the banks would lend this to businesses to generate recovery, but investors placed much of the funds in stock markets and developing countries.

The surge in capital inflows led to a strong recovery in currency, equity and bond markets of major developing countries. Some of these countries welcomed the new capital inflows and boom in asset prices.

Others were angry that the inflows caused their currencies to appreciate (making their exports less competitive) and that the ultra-easy monetary policies of developed countries were part of a “currency war” to make the latter more competitive.

In 2013, capital inflows into developing countries weakened due to the European crisis and the prospect of the US Fed “tapering” or reducing its monthly bond purchases.

This weakening took place just as many of the emerging economies saw their current account deficits widen. Thus, their need for foreign capital increased just as inflows became weaker and unstable.

In May to June 2013, the Fed announced it could soon start “tapering”. This led to sudden sharp currency falls, including in India and Indonesia.

However, the Fed postponed the taper, giving some breathing space. In December, it finally announced the tapering — a reduction of its monthly bond purchase from US$85bil (RM283bil) to US$75bil (RM249bil), with more to come.

There was then no sudden sell-off in emerging economies, as the markets had already anticipated it and the Fed also announced that interest rates would be kept at current low levels until the end of 2015.

By now, however, the investment mood had already turned against the emerging economies. Many were now termed “fragile”, especially those with current account deficits and dependent on capital inflows.

Most of the so-called Fragile Five are in fact members of the BRICS, which had been viewed just a few years before as the most influential global growth drivers.

Several factors emerged last week, which together constituted a trigger for the sell-off. These were a “flash” report indicating contraction of manufacturing in China; a sudden fall in the Argentini­an peso; and expectations that a US Fed meeting on Jan 29 will announce another instalment of tapering.

For two days (Jan 23 and 24), the currencies and stock markets of several developing countries were in turmoil, which spilled over to the US and European stock markets.

If this situation continues this week, it may just signal a new phase of investor disenchantment with emerging economies, reduced capital inflows or even outflows. This could put strains on the affected countries’ foreign reserves and weaken their balance of payments.

The accompanying fall in currency would have positive effects on export competitiveness, but negative effects on accelerating inflation (as import prices go up) and debt servicing (as more local currency is needed to repay the same amount of debt denominated in foreign currency).

This week will thus be critical in seeing whether the situation deteriorates or stabilises, which may just happen if the Fed decides to discontinue tapering for now. Unfortunate­ly, the former is more likely.

 Contributed by Global Trends  Martin Khor
> The views expressed are entirely the writer’s own.

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Fed Slows Purchases While U.K. Growth Picks Up: Global Economy   

The global economic expansion is speeding up, data this week are projected to show. In the U.S., a gain in fourth-quarter gross domestic product probably completed the strongest six months of growth in almost two years for the world’s largest economy. The pickup combined with progress in the labor market means Federal Reserve policy makers meeting this week may ease up again on the monetary accelerator.

Across the Atlantic, the U.K. economy may have grown over the past 12 months by the most in almost six years, while in Germany, business confidence probably improved to the highest level since mid-2011.

This week also includes central bank meetings in Mexico and New Zealand. In Mexico, monetary officials may keep the benchmark interest rate unchanged as more government spending reduces the need for stimulus. Such a decision is less clear in New Zealand, where odds of an interest-rate increase have climbed.

U.S. ECONOMY

-- Gross domestic product advanced at a 3.2 percent annualized rate in the fourth quarter as spending by American consumers climbed by the most in three years, economists forecast the Jan. 30 figures will show. Combined with a 4.1 percent inventory-fueled gain in the prior period, GDP in the second half of the year was the strongest since the six months ended March 2012.

-- “A substantial acceleration in private sector demand led by stronger consumer spending and a significant pickup in exports after weakness through the first part of the year should drive a second straight quarter of near 4 percent real GDP growth even with an expected drag of 0.5 percentage point from federal government spending, largely reflecting lost work hours during the government shutdown,” Ted Wieseman, an economist at Morgan Stanley in New York, wrote in a Jan. 17 report.

-- “The first cut of Q4 GDP will be more about the internals of the report than the headline,” economists at RBC Capital Markets LLC, led by Tom Porcelli, wrote in a research note. “While we look for a 2.8 percent annualized advance in top-line growth, the details should seem even brighter with real personal consumer consumption rising 4 percent. We anticipate that the inventory swing will hold growth back a full percentage point.”

FOMC MEETING

-- Ben S. Bernanke will chair his final meeting of Federal Reserve policy makers on Jan. 28-29 before handing over the reins of the world’s most powerful central bank to Janet Yellen. Bernanke and a different cast of regional Fed bank presidents who’ll vote on the Federal Open Market Committee are projected to reduce the pace of Treasury and mortgage-backed securities purchases by a total of $10 billion to $65 billion as the economy improves.

-- “We expect the Fed to announce another $10 billion taper and possibly strengthen its guidance,” Michael Hanson, U.S. senior economist at Bank of America Corp., said in a research note. “The Yellen-led Fed will see numerous personnel changes in 2014, but we still expect a patient and very accommodative policy stance.”

-- “The FOMC will likely upgrade its summary of current economic conditions in its policy statement,” BNP Paribas’ Julia Coronado, a former Fed Board economist, said in a research note. “The Q4 performance is expected to be driven by final demand, in particular a surge in consumer spending on goods and services. The January FOMC statement could acknowledge this better performance by stating that ‘economic growth picked up somewhat’ of late.

‘‘The confirmation of their long-held optimistic expectation for stronger economic growth and tranquil financial markets will likely lead the Committee to announce another ‘measured step’ in the tapering process. We expect another $10 billion cut in the pace of QE asset purchases.’’

U.K. ECONOMY

-- Britain will be the first Group of Seven nation to report gross domestic product for the fourth quarter when it releases the data on Jan. 28. Economists forecast growth of 0.7 percent, close to the 0.8 percent expansion in the prior three-month period. From a year earlier, GDP probably rose 2.8 percent, driven by domestic demand, which would be the best performance since the first three months of 2008.

-- ‘‘To date, the recovery has been somewhat unbalanced, led by consumption, so we remain skeptical about the sustainability over the medium-term,’’ said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. ‘‘Still, there is clearly sufficient momentum in the short-term data to underpin trend-like rates of growth.’’ Walker sees the economy expanding 2.7 percent this year, just above the Bloomberg consensus estimate of 2.6 percent.

GERMAN BUSINESS CONFIDENCE

-- German business confidence is heading for its highest reading in 2 1/2 years, underlining the strength in an economy that’s helping to power the euro-area recovery. Economists in a survey, set for release on Jan. 27, see the business climate index increasing to 110 in January from 109.5 last month. Germany will continue to outpace the euro area this year, with the International Monetary Fund forecasting 1.6 percent expansion, compared with 1 percent for the currency region.

-- Thilo Heidrich, an economist at Deutsche Postbank AG in Bonn, said the ‘‘mood in the German economy is likely to have brightened at the start of the year.’’

-- ‘‘The near-term outlook remains one of cautious optimism,’’ Bank of America economists including Laurence Boone said in a note. ‘‘Domestic demand, in particular, should support growth in coming years.’’

JAPAN TRADE

-- Japan’s trade deficit narrowed to 1.24 trillion yen ($12.1 billion) in December from a month earlier, even as import growth probably accelerated, according to a Bloomberg survey of economists before data due Jan. 27. A record run of monthly deficits shows the cost of the yen’s slide against the dollar and the extra energy imports needed because of the nuclear industry shutdown that followed a disaster in 2011.

-- ‘‘Throughout the year, few manufacturers believed that the yen would stay weak, let alone depreciate further,” Frederic Neumann, Hong Kong-based co-head of Asian economics at HSBC Holdings Plc, said in a research report. “As a result, (dollar) prices charged for goods sold overseas were not cut amid fears that such a move would have to be reversed once the currency strengthened again, something that few firms like to do. All this meant nice profits for Japanese firms (higher yen earnings for their shipments) but no gain in export market shares.”

NEW ZEALAND RATES

-- Economists and markets are split on whether the Reserve Bank of New Zealand will increase the official cash rate for the first time in 3 1/2 years at its Jan. 30 meeting. Governor Graeme Wheeler said late last year the RBNZ will need to raise interest rates in 2014 as growth and inflation accelerate and unemployment declines. While only three of 15 economists predict Wheeler will lift the rate by 25 basis points to 2.75 percent this week, markets are pricing in an almost 70 percent chance he will do so.

-- “The lists of reasons are long for both the ‘why wait’ and ‘why not’ sides of the fence,” Nick Tuffley, chief economist at ASB Bank Ltd. in Auckland, said in a research report. “The RBNZ can justify either outcome, and we put the chances of a rate hike as 1 in 4. That is to say, not our core view, but a significant risk.”

MEXICO RATE DECISION

-- Mexico’s central bank on Jan. 31 may keep the overnight interest rate unchanged at a record-low 3.5 percent in its first decision of 2014 as increased government spending stimulates the economy.

-- “There’s no need to reduce the rate any more” after 0.25 percentage-point reductions in September and October, Marco Oviedo, chief Mexico economist at Barclays Plc, said in an e-mailed response to questions. “The economy has shown signs of recovery.”

-- Policy makers have “sent the message that they’re comfortable with the current level of interest rates,” said Gabriel Lozano, chief Mexico economist at JPMorgan Chase & Co. With sales tax increases fanning inflation, “real interest rates are temporarily negative, but the central bank will be confident this is a transitory situation that will correct in the second half of the year” as inflation slows.

Contributed by Vince Golle Bloomberg

An utterly unrepentant Japan opening up past wounds derail peace diplomacy

Whatever declarations Japanese leaders may make about the aims of their visits to the Yasukuni Shrine being only to honour their war dead, the acid test is whether victims of their past aggression believe them.

THE recent visit by Japanese Prime Minister Shinzo Abe to the Yasukuni Shrine has provoked a very negative reaction in China and South Korea.

While less strident, other countries like the United States and Singapore also did not approve of the visit. The former expressed disappointment while the latter stated that it regretted the visit.

At the heart of the disapproval is the belief that such a visit indicates that Japan has not come to terms with its past of aggression in Asia. Many compare this unfavourably with Germany where it is very unlikely, if not inconceivable, that the highest German political leader will ever make a public visit to a shrine of Adolf Hitler or of any top Nazi leader.

How valid is this comparison?

It is first necessary to state that the issue is somewhat more complicated than a clear-cut case of an utterly unrepentant Japan and a completely contrite Germany. The Japanese public are deeply pacifist. While it is true that they have caused tremendous destruction in Asia, they themselves have been profoundly scarred by the atomic devastation of Hiroshima and Nagasaki.

Moreover, there are many Japanese, parti­cularly those in the teachers’ unions, progressive intellectuals – especially from the older generation – and others, who are unequivocal in their condemnation of their country’s record in the Second World War.

Germany, for its part, did experience some neo-Nazi manifestations, especially in the eastern part of Germany just after reunification. And there was the controversy over the visit of President Reagan to a cemetery in Pitburgh in 1985 where some of Hitler’s Waffen SS were buried.

Helmut Kohl, then Chancellor, despite protests from many Jewish personalities, insisted that Reagan together with Kohl himself, not cave in to the protests. The Germans argued that many German cemeteries have buried SS officers. Moreover, many of these SS men were innocent young men forced to join the SS at a young age.

Such aside, it is nevertheless clear that in the main, the Germans have come to terms with their recent history. They have clearly acknowledged they did wrong under Hitler and have vowed not to resurrect the Third Reich.

They have, in addition to giving substantial reparations to their victims, made many convincing gestures of contrition, one of the most dramatic being that of the then Chancellor, Willi Brandt, going down on one knee in a monument in Poland in 1970 honouring the victims of the Warsaw Ghetto uprising during the Nazi era.

The Japanese on their part are much more ambivalent. Their apologies have been hedged about by many qualifications, and often when made by one leader refuted by statements and actions of other leaders.
And, more dramatically, some of their highes­t political leaders have visited, and intend to continue visiting, the Yasukuni Shrine where many class one war criminals have been enshrined.

Whatever the declarations the Japanese may make about the aims of their visits to Yasukuni being only to honour their war dead, the acid test is whether their war victims believe them. In this, the Chinese and Koreans do not. On the other hand, the victims of the Germans do.

The most dramatic recent example is the plea by the Polish foreign minister in 2011 to the Germans to take leadership of a federal Europe!

One can hardly expect a Chinese or Korean leader to ask for Japanese leadership in Asian affairs!

There are three reasons why both differ in their approach to their recent history. One consists of what they actually, or believe they actually, did.

Amidst the horrors of war the Germans unleashed, they went on an extermination of Jews and other groups which could not be justified by the exigencies of war or by any other wrongs that others may have been inflicted on the Germans. Such an extermination was a clear-cut case of genocide.

Many Japanese, on their part, argued that they committed no such genocide in Asia, and what atrocities Japanese soldiers committed were not a result of policy but of the stress of war. Moreover, in their colonial conquests, they were only following the examples of the Western colonial powers. In some places like South-East Asia, they helped their liberation movements.

While there is some degree of truth in the Japanese argument, some heinous crimes such as the human experimentation by their notorious Japanese Unit 731 and the testing of bacteriological warfare in parts of China cannot easily be justified as due to the strains of war.

While the Western comparison over colonial conquests may seem valid, it cuts no ice with those countries colonised, like Korea and China.

In fairness, some Japanese scholars acknowledge that whatever the Western example, they were wrong in colonising these two countries. Hopefully, such acknowledgement can be one basis for reconciliation between Japan and their Northeast Asian neighbours.

The second reason, somewhat related to the first, is the lack of a regional grouping the Japanese could identify with or be a member of. Germany had a regional organisation, the European community, they could, if not subordinate themselves to its regional aims, use as the focus of their attempt not to repeat their past.

In the words of one of the greatest 20th century German intellectuals, Thomas Mann, Germany should strive for a European Germany, not a German Europe. Asia is too diverse, culturally and economically, and still filled with bitter war memories, for Japan to identify with.

Third, the de-Nazification campaign in Germany was quite thorough. Few Germans, if any, with Nazi connections were allowed to occupy significant governmental and private posts in post-war Germany.

Japan was different. While in the initial stages, the Americans, who basically dominated Allied policy (there was more non-American input in running post-war Germany), intended to purge Japan of those involved in Japanese aggression in Asia, they subsequently relented by allowing many to assume positions of influence in a post-war Japan. (Abe’s maternal grandfather Nobusuke Kishi who was Prime Minister in the 1950s was one of them.)

The US needed an anti-communist, strong Japan against communism in Asia, especially China. It is thus difficult for post-war Japanese governments consisting of many who committed aggression in Asia and who could have influenced their successors to acknowledge they did wrong.

It would now seem that those inclined to the denial that Japan committed aggression are gaining momentum in Japan. It would be a sad day for Japan and for Asia that a Japan which had made a lot of headway in its peace diplomacy after the war would have that peaceful image destroyed by becoming clearly unrepentant about its past.

- Contributed by Lee Poh Ping, a Senior Research Fellow, Institute of China Studies at Universiti Malaya.

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Dialogue 07/25/2013 Shinzo Abe revisits Southeast Asia CCTV News ...

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Dr. Lee Poh Ping, Senior Research Fellow, Inst. of China Studies, University of Malaya

Dialogue 07/25/2013 Shinzo Abe revisits Southeast Asia CCTV News - CNTV English

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