With the Japanese economy still in acute disarray while smaller Asian economies are showing signs of recovery, one obvious question arises. How can the rest of Asia, having gone down into the trough, expect that it can go back up again within little more than a year when Japan has been troubled for more than eight years and still cannot struggle out? There are three good reasons for it.
The first is that an economy as big and as inwardly focused as Japan's can resist the pressures on it much longer than a smaller one. You don't hear of the hedge funds ganging up on the yen as they did on the baht.
The difficulties from which the Japanese economy is now suffering have been building up for decades. Cosy arrangements between commercial powers faced no domestic threats and, with Japan's relative economic isolation, few threats from foreigners. Ill-considered investment can continue a long time when there is no one around to strip off its disguises.
Contrast this with Thailand. It too directed its resources heavily to the wrong things but could only do it for a few years, not a few decades, and, when things went wrong, it was forced to take the painful remedial measures quickly.
The finance companies were wound up, banks were merged and compelled to face their bad loans and the people of Thailand forced to tighten their belts until they had to punch new holes in them.
Thailand has taken its bitter medicine in full. It couldn't argue with the doctor. Japan is still trying to negotiate a cure.
The second reason is that the smaller Asian countries are also generally much poorer than Japan. Gross domestic product per capita in Japan was still US$33,000 last year, 14 times greater than in Thailand, 30 times greater than in the Philippines.
Human beings don't really differ that much from country to country. They each have two arms, two legs, eyes, ears, a brain and a desire to get ahead. It's much easier to do this from a smaller base of wealth than a larger one. A few simple reforms will have a greater proportional effect on wealth creation in Thailand than in Japan.
The third reason is something called yield structure. It went awry in Japan. During the bubble economy of the 1980s a low inflation rate, a strong currency and the man on the street's disinclination to take his savings out of the country drove interest rates and other returns on yen investments to very low levels.
For instance, yields on property (annual rental income as a percentage of capital value) were routinely well below 1 per cent.
But rents went down and the yields that property investors were willing to accept went up when the bubble burst. More income was required per yen of capital value but less was had. Mix this in with big ill-advised construction projects and you have Japan's banking crisis.
In the rest of Asia, property yields were generally in the 6-8 per cent range when the crisis broke last year. Rents and capital values both went down but the yields have not changed much. The proverbial double whammy Japan suffered was avoided.
One, two, three. That's why earlier recovery is not unusual.