via Business Insider:
The Federal Reserve Bank of San Francisco recently hosted the Conference on Asian Banking And Finance
One of the keynote speakers was Masaaki Shirakawa, a Bank of Japan Governor, who gave this awesome presentation titled The Era of Linkages among Asia and across the Pacific Ocean.
Basically, he argues that the links between Pacific economies are quite young. And understanding this is one way of better understanding the incredible economic opportunities that remain in Asia.
“Since the voyage of Christopher Columbus in 1492, there have been economic, cultural and political exchanges between the two sides of the Atlantic Ocean for more than five centuries,” said Shirakawa.
“Compared to this long history of trans-Atlantic linkages, the history of trans-Pacific linkages is quite brief.”
He broke down the brief economic history of Asia’s economy in this post trans-Pacific linkage world.
In order to cross the Pacific, “Spanish people of the 16th century had to build the largest galleons they could, whose size was as much as 2,000 tons”
However, it wasn’t until just a few decades ago that the west saw the Asia-Pacific region as a major economic bloc
The disruption in U.S. auto production in the wake of last year’s tragic Japan earthquake reminded us of the strong linkage between Asia and the rest of the world
The Japan earthquake crippled production across Asia as well
Asia is also an “incubator of innovation.” Just look at the amount of iPhone hardware that’s made in Asia
Economic growth in Asia is expected to outpace growth in the rest of the developed world
Asia is also growing its share of global GDP. It’s expected to account for over 40% of GDP by 2030
Asia’s share of global trade is also expanding
Here’s a breakdown of trans-pacific trading activity
Asia’s share of the trans-pacific trading activity increased from 25% in 1990 to 45% in 2008
Thanks to growth in Asia, the global economy did not experience the prolonged slump experienced in the wake of the Great Depression
Japanese banks are increasingly lending within Asia versus overseas
Japanese banks are filling in where deleveraging European banks have been scaling back
Japan’s direct investments in Asia is now exceeding its direct investments in the European Union
However, Asia’s working age population is on the decline. How each country responds to this could have major implications for their economic fundamentals
Foreign exchange risk have been mitigated by continuous linked settlement (CLS) systems. However, many emerging market currencies are not availabel for CLS settlement