out by a strong bull run over the past three months. some other emerging markets, for example brazil, were affected much more severely than south africa. the question is often asked why was south africa left almost unimpaired by the east asian crisis? there are a number of reasons for this : firstly, it must be remembered that south africa had its own mini - crisis in 1996 when sudden capital outflows from the country forced a depreciation of the rand of more than 20 per cent, and the introduction of restrictive fiscal and monetary policies that reduced the growth rate in total domestic expenditure from 5. 0 per cent in 1995 to 2. 7 per cent in 1996, and 1. 4 per cent in 1997. at the time of the east asian crisis, south africa had just gone through a very painful downward economic adjustment period that satisfied foreign investors of our resolve to apply acceptable macroeconomic disciplines. secondly, the south african problems of 1996 were created by a cyclical disequilibrium, following from excessive rates of growth in total domestic expenditure, and this situation could be corrected fairly easily with the right kind of monetary and fiscal policies. in most of the east asian countries, the fundamental problems are more of a structural nature and will require longer and more painful adjustments to restore growth to previous levels. there are, nevertheless, a number of lessons to be learned by south africa from the east asian crisis. our country is also being integrated more and more into the global markets of the world and, as in the case of those countries, developments in south africa are also subject to the very critical surveillance of the international investors ’ community. at this stage, their critical monitors are being focused on : • • • • • • • the health and soundness of the domestic financial sector ; the openness and efficiency of the money and capital markets, and the market in foreign exchange ; the transparency, both of policies and of macroeconomic data made available by the authorities ; the quality of governance in both the public and the private sectors of the economy ; the macroeconomic policies followed in the country by the monetary and fiscal authorities, and in respect of labour and commodity markets ; the overall balance of payments situation, including developments in the current and in the capital accounts ; and the total outstanding foreign liabilities, with special reference to the vulnerability of the country for sudden outflows of capital. in recent months, foreign investors showed their satisfaction with the south african situation by continuing to increase their investments in south africa

bank of japan ’ s may report of recent economic and financial developments1 bank of japan, may 21, 2001. * the bank ’ s view * * adjustments in economic activities have been under way, as production is declining reflecting a fall in exports. with regard to final demand, the recovery in private consumption continues to be weak as a whole, but there are somewhat positive signs in some indicators. housing investment is declining slightly. public investment is increasing. on the other hand, net exports ( real exports minus real imports ) continue to decrease reflecting a slowdown in overseas economies such as those of the u. s. and east asia. business fixed investment seems to be leveling off while the exporting conditions continue to deteriorate. industrial production is declining sharply, reflecting such developments in final demand and as excessive inventories of electronic parts and some materials are building up. the environment surrounding corporate profits is becoming more severe in line with the decline in exports and production, and business sentiment of firms is worsening particularly in manufacturing. income conditions of households have not yet deteriorated, but the decline in production is starting to affect the household sector mainly through the decrease in hours worked. as for the outlook, public investment is expected to continue increasing for the time being. net exports, however, are likely to continue decreasing for a while, reflecting the ongoing adjustments in overseas economies. business fixed investment is projected to peak out and then to start a downturn, as the effects from the implementation of a backlog of orders sustaining investment dissipates. in addition, inventory adjustments in goods such as electronic parts and materials will continue for the time being. industrial production, therefore, is expected to follow a declining trend. in these circumstances, corporate profits are likely to start decreasing and thus household income is expected to weaken gradually. overall, the adjustments are likely to continue for some time, mainly in production. meanwhile, it is generally thought that overseas economies, particularly the u. s., will follow a gradual recovery trend from the latter half of 2001. in this case, exports, helped also by the depreciation of the yen, are expected to underpin the economy once again. however, attention should still be paid to the possibility of a prolonged deceleration of overseas economies and the risk of a negative impact on the economy induced by developments in foreign and domestic capital markets via corporate and household confidence. with regard to prices, import prices are rising, mainly reflecting the depreciation of the yen. domestic