Pesek's View From Asia
Greetings, everyone. Here's my take on some of the stories driving the debate in politics, finance and social issues across Asia today:
Japan disappointed the world with a gross domestic product gain that raised fresh questions about Shinzo Abe's revival plan.
The problem is less that Japan grew 2.6 percent on an annualized basis in the second quarter, than the reason why it failed to match the 3.8 percent first-quarter rate: stingy businesses. Japan’s top listed companies doubled earnings between April and June from a year earlier (up 103 percent). Yet business investment fell at a 0.4 percent annual pace, proving that while Prime Minister Abe's weak-yen policies have been a boon to corporate executives, they aren't returning the favor. Getting companies to share profits by upping wages and boosting research-and-development budgets is a cornerstone of Abe's strategy. He going to have to work harder and faster to spark that virtuous cycle.
Hopes the ``BRICs'' nations would drive global growth have officially crashed to earth.
It was always a sexy storyline: the unstoppable rise of Brazil, Russia, India and China wouldn't just fill the void left by struggling rich nations, but leave them behind. That sounded great in 2008, after the U.S. imploded and dragged the rest of the Group of Seven down with it. But living without U.S. and European consumers for five or six years is another story. Now, according to analysts at investment firm Bridgewater Associates, advanced nations have returned to their traditional role as global growth engine. Not an overly strong one, mind you, but one that reminds the BRICs nations that they have a long way to go to stand on their own.
With Australia's central bank at, or nearing, the end of its easing cycle, candidates to be the country's next leader need to step up.
Australia's economy has been on autopilot for years. Political gridlock in Canberra put the reins firmly in the hands of central bank Governor Glenn Stevens. With interest rates at a record 2.5 percent, though, the onus is on Australia's next leader to overhaul the economy. At last night's televised debate, both Prime Minister Kevin Rudd and opposition leader Tony Abbott pledged to build a stronger, more productive economy that's less dependent on Chinese demand. Neither man explained exactly how. With elections less than a month away, they should stop looking to Stevens for help and lay out a real, specific growth strategy.
India's worsening cash crunch is beginning to slam the nation's best banks.
Investors are saying ``no'' to Yes Bank, and resoundingly so. The best-performing Indian bank stock last year has lost almost half its market value in less than a month as markets calculate the damage a record surge in interest rates will do to profits and default risks. In a more perfect world, Yes Chief Executive Officer Rana Kapoor would look to the central bank for help. But the Reserve Bank of India's steps to tighten liquidity to bolster the rupee are largely behind the headwinds facing banks that rely on corporate funds. New Governor Raghuram Rajan will have to work harder than his predecessor to get investors to say ``yes'' again.
China gives N.I.M.B.Y. a whole new name -- and scale -- as history's biggest urbanization unfolds.
Premier Li Keqiang is counting on more than 260 million urban migrants and their families to boost consumption and sustain growth in China. But he's hearing one clear message: not in my city. Municipal governments have begun to recoil at the idea of hundreds of millions of rural residents moving to town. At a conference over the weekend, local officials bemoaned the strain the influx would place on their finances, the dangers of over-building and the costs of providing migrants with all the same rights and services as regular residents. ``We are facing rejection from the hearts of so many mayors and city elites,'' one of the conference organizers lamented.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)