Oh, deary me, I do seem to be having my own private version of the Alamo on Japan right now. (I am it will be remembered forecasting that the internal demand resurgence will *not* prove sustainable). Today it is the turn of Andy Xie to join the queue in the other camp:
Japan’s economic recovery is a delayed response to its massive fiscal stimulus over the past seven years and could be a source of autonomous demand the next few quarters. It could stabilize Asia during a potential US downturn. We think Japan as a source of autonomous demand could add half a percentage point to Asia’s GDP growth rate in 2006.
Japan’s demand recovery seems to be spreading. S. Korea and Taiwan are benefiting. Japan reported strong imports from each in August and, judging from Taiwan’s export orders, will likely do so again in September. As Taiwan and S. Korea’s exports are correlated with capital goods demand, the data may indicate pick-up in Japan’s capex. By value, Taiwan and S. Korea’s exports to Japan represent 3-4% of their GDP. We think Japanese demand could add half a percentage point to either’s GDP growth rate in 2006.
Japan’s demand for Asian goods has been highly correlated with US demand for Asian goods, because Japanese demand has been derived from global demand, especially US consumption demand. If Japan is staging a recovery based on domestic demand, its demand could remain strong even as the US economy weakens.
Well, sorry to spoil the party folks but I don't agree. Still the proof of the pudding will be in the eating.
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