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Asia Investments

The Real Housewives of Japan: Shopping for Bargains … Driving Deflation?

KYOTO, Japan – Could 70,000 Japanese housewives tip this Asian giant into a deflationary spiral?

As farfetched as that sounds, it's become a major cause for concern in this nation of 128 million, which has been in an economic funk for two decades. These "real housewives" are part of a user-driven, social-networking site called Mainichi Tokubai, which delivers the best prices on specific grocery-store items to the fingertips of Tokyo-region consumers.

To hear frustrated Japanese policymakers and retail executives tell it, these bargain-minded consumers and their equally frugal social-networking site is almost-single-handedly undercutting the Japan's economy.

"We understand consumers want the best deals," Japan Chain Stores Association executive Shoichi Ogasawara groused to CNN's Kyung Lah. "And we understand that the social-networking site is a natural extension of consumer behavior in the Information Age. But supermarket prices have fallen for 13 years in a row in Japan," and sites such as this are making it difficult to reverse that trend.

Don't make the mistake of believing that something similar couldn't happen here in the U.S. market. Given that Japan's consumer technology tends to be anywhere from 18 months to two years ahead of U.S trends, this could be a preview of what's to come for the badly troubled U.S. economy.

To see how Japan's consumers have taken matters into their own hands, please read on...

"Experts" Grow Bullish on Japan …But We See Reasons For Caution

KYOTO, Japan – Japan's Nikkei 225 is half the relative price of the U.S. Standard & Poor's 500 and is the cheapest that it's been in nearly three decades. This has led many Western analysts to conclude once again that it's "time to invest" in Japan.

I don't "buy" it – and you shouldn't, either.

To understand the obstacles Japan still faces - as well as better profit plays to make - read on...

China May Let Yuan Appreciate Despite First Trade Deficit in Six Years

China's imports pushed higher in March, which may cause the Asian economic powerhouse to post its first trade deficit in six years.  But even though the deficit bolsters its argument for keeping the yuan pegged to the dollar, it appears Beijing will let its currency appreciate in the near future.

Rising commodity prices probably led imports to outpace exports by $390 million in March after a $7.6 billion trade surplus the previous month, according to the median estimate in a Bloomberg News survey of 26 economists.

Nevertheless, a change in China's currency policy is "imminent", and may occur in the next few weeks, Ben Simpfendorfer, a Hong Kong- based economist at Royal Bank of Scotland Group Plc (NYSE ADR: RBS), said Friday on Bloomberg Television.

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Pacifying the Panda: U.S. Companies Must Take a New Approach to China

There's no question about what kind of profit opportunities the Chinese market offers. Moreover, the willingness of U.S. companies to partner with China in the pursuit of profit is equally blatant.

So why is it that more U.S. businesses feel less welcome in China now than they did four years ago?

The fact is that in the past four years, China's economy has continued to grow by leaps and bounds, while a humiliating financial collapse and soaring debt have tarnished much of the shine that once adorned the U.S. market.

Indeed, for the first time in perhaps more than a century China has the upper hand. How long that will last is a difficult question to answer, but right now, China wants to use its leverage to support domestic companies – and it's doing so unapologetically.

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Indonesia Catching China's Eye

It's an open secret that Indonesia's economy is on the rise. In the spirit of March Madness, it's something of a sleeper.  That's why China, which is always looking for promising new investments, is looking to make inroads there.

Indeed, China's appetite for commodities makes Indonesia – with its close proximity and abundance of natural resources – an ideal partner.

PetroChina Co. Ltd. (NYSE ADR: PTR), Sinopec, Sinosteel, Minmetals and China Investment Corp (CIC) – Beijing's $300 billion sovereign wealth fund – are all aggressively scouring South East Asia's largest economy for takeover targets and joint venture partners, the Live Trading News reported.

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The Year of the Tiger is the Perfect Time for Caterpillar Inc.

In China, the tiger is commonly thought of as lazy, merely appearing to be strong and ferocious.

But that's truly not the case. The tiger does not waste his energy showing his strength. Instead, it sees the future and knows precisely when to pounce on its prey. Those who can see past the great wall of today and look into the future – much like our wise friend, the tiger – understand just what it takes to be successful.

If we were to analyze the growth potential for the worldwide construction industry, we would find that Japan's Komatsu Ltd. (OTC ADR: KMTUY) and the U.S.-based Caterpillar Inc. (NYSE: CAT) are best-positioned for global success.

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Goldman Backs Money Morning Prediction That China's Yuan Will Dethrone the Dollar

Back in May, just after he'd completed his latest investing tour of China, Money Morning Chief Investment Strategist Keith Fitz-Gerald made a bold prediction: China's currency, the yuan, is destined to dethrone the U.S. dollar as the world's chief reserve currency.

Earlier this week, Fitz-Gerald's prediction acquired a powerful new disciple: Goldman Sachs Group Inc. (NYSE: GS) Chief Economist Jim O'Neill.

In an essay that's part of a report published Friday for Chatham House, a London-based foreign-affairs researcher, O'Neill wrote that China's yuan is destined to become a global reserve currency on par with the U.S. dollar or European euro.

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Asia's Economic Recovery Gathering Steam with China at the Helm

Manufacturing data today (Monday) confirmed that Asia's economic recovery is gaining strength, and China – whose economy may have expanded at a rate of 9.5% in the fourth quarter – is leading the revival.

The China Federation of Logistics and Purchasing on Sunday said the country's official purchasing managers' index (PMI) rose to 55.2 in December from 54.3 a month earlier. That's the biggest increase since April 2008, and it was aided by an increase in trade. The gauge of export orders rose to 54.5 and the reading for imports climbed to 52.8.

Similarly, the China Manufacturing PMI produced by HSBC Holdings PLC (NYSE ADR: HBC) and Markit Economics jumped from 55.7 to 56.1 last month. The index's average monthly increase in the fourth quarter was the largest on record.

Economists point to these numbers as further evidence of a robust recovery for China's economy, which grew at an 8.9% annualized pace in the third quarter.

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New Stimulus Won't Save Japan From Deflation, Soaring Deficit

Japan today (Tuesday) unveiled an $80.6 billion (7.2 trillion yen) stimulus package to bolster the economy and promote employment. But a sharp drop in exports, declining prices and rising joblessness should continue to plague the world's second-largest economy.

Japan's stimulus package will put $39 billion (3.5 trillion yen) toward supporting regional growth. Some $9 billion (800 billion yen) will go to environmental programs and $6.8 billion (600 billion yen) will be used to promote job growth. Much of the remainder will be used to offer loan guarantees for small companies to ease a credit crunch.

Japan's third-quarter gross domestic product GDP rose at a 4.8% annual rate, after revised growth of 2.7% in the second quarter. But the nation's currency, which is hovering around a 14-year high against the dollar, is jeopardizing the recovery by making Japanese exports more expensive for other countries.

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Preparing For the Next Asia

[Editor's Note: This interview was adapted from a recent issue of the McKinsey Quarterly, the business Journal of McKinsey & Co. It is reprinted with McKinsey's permission.]

Asia has proven comparatively resilient against the current downturn, but hurdles still lie ahead. In order to maintain robust growth rates in the face of weak U.S. demand, the region's dynamic economies must stoke domestic consumption and embrace environmentally sustainable development policies, says Stephen Roach, chairman of Morgan Stanley Asia (NYSE: MS) and author of "The Next Asia: Opportunities and Challenges for a New Globalization."

Clay Chandler, Asia editor with McKinsey & Co.'s publishing group, spoke with Roach in Hong Kong recently. During the interview, Roach analyzed the prospects for increased integration and cooperation between the region's economies; explored the pitfalls and potential for countries like India and Japan; and considered whether the "Asian Century" has finally arrived.

Here is the text of that interview.

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