Is Japan facing a repeat of 1997-98?

While some emerging market assets have seen a sharp sell-off in recent weeks, it is premature to speak of a general crisis sweeping the emerging world. In any case, Japan’s exposure to most of the affected countries is low. More worrisome would be a “hard landing” in China given the strong trade linkages between the two countries. For now, however, we think that the ongoing slowdown in China paves the way for more balanced growth in the future.