Can Japan Maintain its Movement Toward an Economic Recovery?

Business/Government/Assignment Editors

NEW YORK--(BUSINESS WIRE)--Aug. 22, 2003

The Japan External Trade Organization  New York (JETRO NY) released a newsletter today examining the prospects for economic recovery in Japan. It can be viewed at: http://www.jetro.org/newyork/focusnewsletter/focus26.html. A summary is posted below.

* Investors Continue to Show an Increased Interest in Japan

For over a decade, investors have been underweight Japan, concerned
over the ability of Japanese leaders to confront problems facing the
Japanese economy. Current purchasing and the recent appreciation of
Japanese equities provides an indication perceptions are changing.

* Japan's Economy Grows by Annual Rate of 2.3% in Second Quarter

In addition to 2.3% annualized growth rate in the second quarter --
marking six consecutive quarters of growth, capital investment has
gone up five, and consumer spending seven quarters in a row. New job
vacancies have surged, increasing nine consecutive months, including a
14.1% rise in June over the prior year.

* Doubt Over Japan's Desire for Reform Now Shifts to Examining
Extent of its Problems

It remains to be seen whether the recent appreciation in Japanese
equities reflects a sustainable improvement in Japan's fundamentals or
a temporary cyclical upturn.

* Identifying the Obstacles that May Constrain Economic Recovery in
Japan

    --  Can Japan Resolve its Serious Non-Performing Loan Problem?

        One of the most critical problems facing Japan is
        non-performing loans (NPL). It is estimated approximately $369
        billion in bad loans remained as of March 2003 -- about 8% of
        Japan's GDP.

    -   Resona Recapitalization Marks Major Advance in Resolving
        Japan's NPL Problems

        Japan injected approximately $17 billion of public capital
        into Resona Bank - the fifth largest in Japan. This raised
        Resona's capital adequacy ratio to more than 12%. Senior
        managers were changed and shareholders forced to suffer a
        dilution of their holdings.

     -  IRCJ Sets Off Moves by Banks & Buyout Firms that Accelerate
        Restructuring Process

        Japan's new Industrial Revitalization Corporation (IRCJ) is
        moving to revitalize struggling companies that can reorganize
        themselves in three years. It is now conducting due diligence,
        with hopes of announcing its earliest targets as early as the
        end of this month.

     -  Japan's FSA Requires Troubled Banks to Submit Business
        Improvement Plans

        Japan's Financial Services Agency (FSA) will require 15
        financial institutions who have received public funds to
        submit business improvement plans by August 29, 2003.

    --  Can Japan Allow Bankruptcies & Continue to Enhance Corporate
        Governance?

        In spite of the pain that accompanies reform and a once
        unthinkable unemployment rate exceeding 5% since 2001 -- Japan
        continues to introduce regulatory reforms that facilitate
        stronger corporate governance and business reorganization.

     -  Japanese Firms and Investors are Still Adjusting to the
        Latest Regulatory Developments

        New regulations have and continue to be put into place, yet it
        is fair to say Japanese firms, shareholders and others need
        time to adjust themselves to this new corporate dynamic.

     -  Corporate Bankruptcies in Japan Declined Over the First Half
        of 2003

        Bankruptcies in Japan declined during first half of 2003.
        There were 8,984 cases during the January-June period -- the
        first time in four years bankruptcies came in below 9,000.

        Japan continues, however, to recognize restructuring and
        reorganization is desirable and essential.

    --  Can Japan Restore Domestic Consumer and Corporate Demand?

        Consumer optimism eroded with the collapse of Japan's "bubble
        economy" in the early 1990s. Positive data generated in recent
        months hopefully indicates a reversal of this trend.

* Internationally-Focused Investors Clearly Need to Pay Closer
Attention to Japan

Investors are advised to begin paying more attention to Japan and the
many attractive opportunities that are emerging.

Focus is published and disseminated by JETRO New York, in coordination
with KWR International, Inc., New York, NY 10023, Tel: [phone],
Fax: [phone], E-mail: [e-mail]. JETRO New York is
registered as an agent of the Japan External Trade Organization,
Tokyo, Japan and KWR International, Inc. is registered on behalf of
JETRO New York. This material is filed with the Department of Justice
where the required registration statement is available for public
viewing.