Glimmer of hope for Asia economies

Fujitsu is just one of many Japanese technology firms feeling the pinch of a global slowdown in demand

By CNN's Marianne Bray

HONG KONG, China -- While the latest economic figures out of Japan add to the global blues, some analysts say it is not all gloomy for Asia-Pacific economies.

On Friday, Japan said its economy had shrunk in the second quarter, affirming the view among economists it is heading for its fourth recession in a decade.

The 0.8 percent quarterly dip in GDP follows a slew of bad news for the world's second largest economy.

A stream of electronics companies, including Fujitsu, Hitachi and Toshiba, have said they will slash jobs over recent weeks. This comes as Japan's jobless rate hit a record 5 percent in July, the highest since the government began keeping such data in 1953.

In another blow, influential rating agency Moody's said it was reviewing the country's debt even as the government seeks to carry out painful reforms, targeting Japan's debt-laden banks.

The GDP drop sent embattled Tokyo shares shuddering around 17-year lows on Friday.

Global woes

Japan's misfortunes came one day after a string of bad news sent Wall Street and European stocks plumbing two-year lows.

This so-called "synchronized" downturn in the world's largest powerhouses has led analysts to worry about how the world is going to climb out of it.

The last time all the world's biggest economies slowed at the same time was in the mid-1970s oil shocks.

Since then, boom and bust cycles have come in different phases. Countries have been able to pull each other out, with the strongest providing momentum for the weakest.

But globalization has led to "cyclical intertwining" analysts say, hitting embattled Japan -- which has been struggling to lift itself out of the doldrums over the last decade -- particularly hard.

Searching for a silver lining

This is a big threat for Asia, with Japan the second-largest market for electronics and a key export market for most countries in the region.

The high-tech sell-off has already crimped Asian exports, driving Singapore and Taiwan into recession. Hong Kong and Japan are at the brink.

But despite the doom and gloom, some experts see a sprinkling of good news in Asia. One or two countries are still thriving on strong domestic growth.

There are also signs elsewhere in emerging Asia that manufacturing might be starting to hit "a bottom."

U.S. central bank chairman Alan Greenspan says the world's largest economy is skirting close to recession

Taiwan's leading indicators rose for two months in a row after falling for 16 months, Keon Lee, regional strategist for J.P. Morgan Chase, noted in a CNN interview.

Malaysia on Friday posted an 8.4 percent rise in industrial production over July, after months of falls. Lee also noted that South Korean exports may be turning around.

South Korea's GDP grew at 2.7 percent for its second quarter, the worst rate in three years but not bad by world standards. Analysts say reforms there are starting to pay off.

And while Philippine exports and Singapore's manufacturing activities are both still falling, they are both doing so at a slower pace, raising hopes the plunge in business from the global slowdown may be hitting bottom.

'A shift'

All those trends amount to a distant ray of hope. At least things aren't getting worse.

"While a recovery is still a few months away, it is a change in trend away from the sharp downward momentum," Lee told CNN. "There is a shift."

Analysts remain cautious and say there are not an awful lot of bright spots for Asia, particularly with strong pessimism about Japan. But they hope those are signals that the worst is over.

"There are some encouraging signs but economists are waiting to see they are not a false dawn," said Simon Flint, senior Southeast Asia market analyst for Bank of America in Singapore.

Asian powerhouses?

And while the world's most populous countries, China and India, have been largely ignored in recent decades, and have remained relatively immune to the slowdown, they are both countries to watch in an increasingly global economy.

China's economy is roaring along at a 7.9 percent growth rate, while India's economy is bounding at 3.8 percent.

"They're both insular and not exposed to the electronic downturn partly because consumer confidence is so high," Lee said. "The Chinese government's fiscal stimulus is buoying domestic demand."

China is both a boon and a bane for Asia. It is a key competitor to its Asian neighbors and a sponge for overseas investment. But some see it as a key to boosting Asian growth, too, as Beijing seeks to build up its domestic industry.

China is confident it will be cleared to join the World Trade Organization next week -- more than 15 years after applying for membership, and two years after trade officials started predicting its imminent acceptance.

The fastest growing economy in the region after China is Vietnam's small economy, growing at a 6.8 percent clip.

Australia too is posting solid but unspectacular growth. It is also more insulated, and a weakening dollar has buoyed demand for exports.

But those are glimmers of hope. While economies in Asia may one day be counted among the world's powerhouses, all eyes remain on the U.S. market for a real ray of sunshine.

Flint noted investors worry that sagging demand from the American consumer may mean more gray days ahead.