In Korea too, the structural reform agenda is far from complete, particularly in restructuring the chaebols. Among the potential victims of the crisis, the Philippines economy performed exceptionally. The Philippines was in an IMF program at the start of the crisis, and it skilfully pursued good policies, both by allowing the exchange rate to adjust when it came under pressure, and by defending it through interest rate policy. As the economy came under pressure, IMF financing for the Philippines was increased. The country benefitted from the composition of its trade, which is more heavily weighted towards the United States than that of the more severely affected countries.
Japan accounts for more than half the output of the region.
There could have been no better news for the region than the strong first quarter recovery reported for Japan. While it is yet to be seen whether the recovery is firmly under way, policies are now playing a constructive role to strengthen demand, and bank recapitalization is underway. It will likely be necessary later in the year to ensure that fiscal policy continues to support the expansion. A daunting agenda of structural reform of the state sector and the banks remains, but the authorities have made it clear that they are committed to accelerating reforms in these areas. But all this is fragile.