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Euromoney Country Risk

Minefield of risks faces investors in Japan and South Korea

There is seemingly no easing of risk for the two countries, despite the anticipated third-quarter economic improvement.

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Asian investors may be comforted by the fact China’s economy was brought back to life in the second quarter, after the lockdown-induced collapse in the first months of the year, but the difficulty of managing the region’s risk-return profiles remains.

No fewer than 15 countries in Asia experienced higher risk during the first half of this year, according to Euromoney’s survey of experts, including Japan and South Korea, as Covid-19 dealt a heavy economic blow – and there is little indication yet of it being defeated.

Japanese troubles

Take Japan and its eternal battle to rid itself of damaging deflation. No sooner was there some hope of slaying this perennial dragon, while also conveniently raising consumption tax to bolster fiscal revenue without incurring too much long-lasting damage to the economy, when coronavirus struck, postponing the Tokyo Olympics and plunging the country into a much bigger crisis.

The fact Japan’s quarter-on-quarter real GDP decline of 7.8% in April-June was less severe than in the Germany, the UK or the US is scant consolation. It was the third consecutive quarterly contraction, putting the country on course for its deepest recession of the post-war era, translating into a whopping 27.8%

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