The latest report from the BOJ is far from gloomy. "Japan's economy is recovering gradually, with corporate profits and business fixed investment continuing to increase. With regard to net exports (real exports minus real imports) continue to follow a moderate upward trend due to steady development in overseas economies, and public investment remains at a high level, reflecting the progress in the implementation of the supplementary budget for fiscal 1999," it said.
The Japanese outsourcing trend may meanwhile have other long-term implications for Taiwan. The increased exports to Japan may help Taiwan to narrow its mind-boggling trade deficit with Japan -- a major focus of official attention over the past couple of years.
Most significantly, it may bring in more Japanese capital into Taiwan's stock market, though it must be made clear that there is so far no theoretical basis for the notion that stronger trade is usually followed by larger capital flows between the trading nations.
But just as the US-Taiwan high-tech symbiosis brought Taiwan into the radar screens of US and European fund managers, Japanese institutional investors, for instance, may find it odd not to look at Compal, the notebook maker, when Toshiba is buying an estimated 800,000 units of notebook computers from that company a year.
Japanese institutional investors are grossly underweight in Taiwan. As of June 2000, Japanese institutional investment in the Taiwan stock market stood at US$6.4 billion, which is insignificant given the colossal size of the Japanese overseas investment and the close ties between the two economies.
Figures already indicate that Japanese buying in the stock market is picking up, although it will be too early to draw a parallel between the two trends. Japanese institutional investment in the Taiwan stock market in January to June hit US$480 million, which is close to the whole year figure of US$500 million in 1999.
But one thing is for sure. If the Japanese financial restructuring forces Japanese investors to seek more diversified portfolios and allows Japanese fund managers to take riskier bets, this outsourcing trend in the notebook PCs and DRAM will gradually convince Japanese institutions on the strength of the island's high tech sector. High time to prepare for a closer integration between the two economies.
Tsering Namgyal is a Taipei-based freelance writer (he can be reached at tsering_namgyal@yahoo.com.tw).
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