Forecast of 8 Key Pacific Rim Trends for 2000

marked shift to the left by the U.S. and a clear shift to the right by Japan will combine to trigger important realignments in the Pacific Rim.
     Continuing longterm shifts, as well as conditions prevailing at year end, suggest the following 8 key trends will dominate Pacific Rim developments during 2000 and beyond:

1. In the U.S. politics will take a marked turn to the left due to the strong desire to keep the door open to continued economic growth and a reaction against the impeachment nightmare which will be blamed on a Republican congress rather than an errant president. The shift will favor freer trade, more activist social programs, warming of relations toward China and restructuring of the military for a smaller, quicker-deploying hi-tech armed forces.
2. In Japan a strong move toward the right will be fueled by voters weary of recession and a cynical political system fixated on preserving the status quo. Rightwing politicians like Shintaro Ishihara and Ichiro Ozawa will win a growing public mandate to shake things up by flexing Japan's economic, political and even military muscle in world affairs. Relations with China and the U.S. will grow strained while Taiwan will be embraced as an increasingly important economic ally and counterweight to China's growing influence over East Asia, especially South Corea.
3. In China leaders focused on preserving economic growth and keeping reform on track will soft-pedal the conflict with Taiwan for the next year or two even while keeping up a war of words and paying lip service to strengthening the military. China will aggressively court the U.S. and South Corea as key economic and political allies in light of the simmering conflict Taiwan and an incipient conflict with Japan.
4. In Corea President Kim will devote his best energies to taming the bitter political conflict with the opposition and to keeping regional animosities in check while trying to head off the inevitable showdown with major chaebol chafing at governmental controls. Internationally Kim will try to maintain a balancing act with the U.S., China and Japan using the possible threat of North Corea for leverage.
5. In Taiwan tension will increase between the Kuomingtang trying to advance outgoing president Lee Teng-hui's two-states doctrine and a growing faction, led by industrialists, seeking a politically secure framework that will accommodate China's desire for ultimate unitification. The Kuomingtang faction will seek and find strength in a tacit alliance with Tokyo against the looming threat of Chinese domination of East Asia's future.

6. The North Corean leader will continue moving toward increasing economic ties with the South and the U.S. but will keep the pace of opening slow and deliberate in order to squeeze out maximum advantage from playing them off against Japan. Also, Kim Jong-il fears that opening too rapidly will create a dangerous rift between the economic and military factions.
7. Relations between the U.S. and Japan will experience growing tensions as Japan becomes more aggressive in building up its own international stature and influence with Taiwan, South Corea, the European Union and Latin America. Also, Japanese instinctively fear that the U.S. desire for closer relations with Beijing will produce a new axis in which China will replace Japan as America's key strategic partner, especially as tensions escalate between the U.S. and Russia. In addition, the U.S. is wary of Japan's desire to combine with Corea and Taiwan and possibly even China to form an East Asian economic bloc that could weaken the U.S. position as the world's economic center of gravity.
8. As the world comes to recognize Corea's importance as a center of technological innovation and an engine of economic growth, its rivalry with Japan will become more overt even as the two neighbors move toward greater economic and cultural integration. There will be a sharp increase in M&A activity among Corean and Japanese companies readying for competition in an East Asian free trade zone. The won should appreciate sharply by mid year despite government efforts at keeping the won in check. Despite that, the KOSPI index will continue its march toward 1,750 by year end.

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