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Metals resources: products in turmoil

  • Economics
  • Political Science


Metals resources: products in turmoil{ Michael J. Shea* 1. Introduction We are in economic turmoil. By de¢nition, this means that no one knows what will happen next. In 1998 the Japanese government announced another ¢scal stimulation package (the seventh since 1992) to stabilise the country's ¢nancial system, bolster con¢dence and achieve positive growth in 1999. This one was the biggest ever, totalling A$320 billion of public works spending and tax cuts. The e¡ort was supported by the United States when President Clinton and Prime Minister Obushi announced an `Asian growth and recovery initiative' package of unspeci¢ed amount or timetable. But so far it has come to naught ö at least until the time of writing. Industrial production plunged in the December quarter to record a Japanese annual contraction of 6.4 per cent. Retail sales fell 4.7 per cent during the year. The strengthening yen is detrimental for exports, and industrial pro- duction will stay low at least through 1999. Changes in wage levels (including the bonus component) will also be negative for another year (estimated down 0.5 per cent). The strong yen derives from a favourable trade balance and rising current account founded on low import values, with low prices for energy imports a major contributing factor. The yen will stay high to the detriment of exports and con¢dence is decidedly fragile. There is concern that China may initiate another round of Asian currency devaluations. The government's restructuring policy includes closure of state-owned enterprises that carried the bulk of social service expenditure. These enterprises have accumulated massive losses whose funding through state banks hides the magnitude of the government de¢cit. The enterprise losses accumulate partly through their social service responsibility and partly through a continuing imbalance between controlled selling prices and open market input costs. # Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishers Ltd 1999

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