welcome to "japan biz cast," i'm shery ahn. it's only been three years since the global financial crisis, and just as it seems the world economy was on the mend, there are signs it could be heading for a relapse. europe's sovereign debt crisis is especially worrying, triggered by greece's finances, the threat now threatens to spread to larger economies, such as spain and italy. >> the global economy has entered a new danger zone, with little running room as european countries resist difficult truths about the common responsibilities of a common currency. >> a lecturer in washington, d.c. on wednesday, zoellick accused european countries of

irresponsibility. saying they have not been able to work together to resolve the credit crisis triggered by the greek debt problem. fears are mounting in financial markets that greece may be have no choice but to default. in the european bond market, investors sold greek sovereign debt last week. on thursday, the price of greece's benchmark ten-year bond hit its lowest level since the launch of the euro. its yield surged through the 26% range. worries are mounting that a falling government bond crisis stepping from europe's credit woes could hurt the banking sector. u.s. credit rating agency, moody's, has already downgraded its assessment on two french financial groups. moody's said it cut the long-term debt and deposit rating from credit agricole and another was lowered to aa-3.

amid growing concerns about the health of euro zone's banks heavily exposed to the region's debt. u.s. lenders have been with holding funds, causing an acute shortage of dollars. to forestall a new liquidity cris crisis, the european central bank announced a new dollar funding operation. the ecb said it will provide three-month loans to commercial banks, in coordination with major central banks, including the u.s. federal reserve, the bank of england and the bank of japan. this new measure comes on top of one-week loans the ecb has been providing since may last year. the ecb is believed to have decided on the new measure, to insure the financial firms have the larger amount of dollars they need through the end of this year. >> and the heart of europe's financial mess is of course, greece. and the big question is, will the country default. on friday, the 17 euro zone finance ministers met in poland

and discussed greece and the spreading debt crisis in europe. in a sign of growing global concern about the situation, u.s. treasury secretary, timothy geithner, made an unprecedented appearance at the meeting. there, the financial leaders agreed to decide by mid october on bailout loans to greece, after seeing what the country has done to put its fiscal house in order. though with rising public discontent over bailing out greece, there may be no more help in store for the euro zone. amid jitters over what could happen to greece and the rest of europe, ather player has made an unexpected entry on to the scene, china. the world's second-largest economy. markets are now focused on what role china could play in helping euro avoid a fiscal meltdown.

>> china has continued to purchase bonds of fiscally-strapped countries like greece, spain and portugal. it was reported last monday that the italian government had asked china to purchase its bonds. so, is the chinese rescue effort likely? to answer this question, i'm joined from hong kong by jim mccafferty, asia research product manager at royal bank of scotland. so, mr. mccarvefy, chaunk so much for coming in. could china step in and help out in a way that will truly benefit europe? >> yes, it can. i think this is not unprecedented. it's just a change in actors. you've seen over time lots of countries like the u.s. help out countries in europe over difficult times.

this time round, china has ascended to the second largest economy in the world and it has the financial balance sheet to help out europe. >> china has so far been very cautious about where it puts its currency reserves. what we're hearing is that instead of buying higher-risk european bonds, it's putting its money into the safer ones like german bonds, that's not going to help, is it? >> i guess china has to look at managing the country's wealth, just like a portfolio manager would manage a portfolio of assets. for that reason, it will put assets into different levels of risk. it won't put all of its eggs into one basket or one country, it will try to spread the risk. for that reason, the bigger countries like germany, which have a better credit outlook will probably fill the biggest part of the government portfolio. the exposure i guess will be lower for greece, portugal and spain. >> what's in it for china to take the risk? >> well china has to spread its assets.

it needs to buy a lot of underlying assets to manage a portfolio. and ultimately, it could agree to some concessions with european governments. if european governments require china to buy its bonds, then those governments may open up the road for china to get involved in better trading situations with each of the sovereign nations. and also, i guess allow china to buy significant national champion assets. which so far they have not been allowed to get access to. >> jim mccalferty from the royal bank of scotland, thank you so much for coming in. >> thank you. the european debt crisis, as well as the slowing u.s. economy are fueling fears of a global economic downturn. but one country that could buck that trend, is indonesia. southeast asia's biggest economy. the auto industry there is especially robust. last year, new car sales rose 50% from 2009. now, automakers like toyota motor are vying to be the car

maker of choice for indonesia's growing middle class. >> translator: not just toyota, but many other car makers are paying close attention to the indonesian market. our expectations are growing ever higher. >> last tuesday, toyota announced plans to produce a new compact car in indonesia. >> the company also began building its second factory east of jakarta on wednesday. it will boost production in indonesia by 60%. toyota's main indonesian vehicle will be based on the etios, a compact car it launched in india last december. to meet local needs, the car's body will be higher in order to cope with indonesia's frequently-flooded roadways. to keep it affordable, the vehicle will not include a heating system.

toyota plans to launch the car in early 2013. it will also increase the numb of dealerships in indonesia from the current 200, to 300. the japanese car maker hopes to boost its market share from the roughly 40% it currently holds. >> translator: we want to work hard to meet people's expectations. we want to grow together. >> there are good reasons why toyota wants to become a bigger player in indonesia. the country has great growth potential. it's not only rich in natural resources, but it's also the world's fourth-most populace nation. it's gdp is growing at a healthy rate of more than 6%. i sat down with associate senior research fellow at the institute

of developing economies, jetro and asked him about the country's mek development. >> in the past few years, with the export of oil and coal and palm oil increased. and the economic growth was caused by those exports. exports, natural resources. >> now, as the economic growth, the number of middle-income classes increase, and they lead the consumption in economic growth in the domestic market. >> how are consumers' tastes changi changing? >> so far, indonesian consumers are consuming foodstuffs mainly. but now their income increased, they're tending to consume more sophisticated and more consumer goods. the middle income class now

accounts 40%, the numbering about 85, to 95 million. in 2020, maybe the total number of middle income class will reach 202 million. it is about 80% of the total population. >> despite indonesia's economic achievements, the country still suffers from poor infrastructure and not enough jobs. so what are the major challenges indonesia faces? >> last may, the government announced a master plan for economic growth in 2011 to 2025. it aims at accelerating economic growth to 7% to 9%. and the government now set a goal of becoming one of the ten largest economies in the world, in 2025. to achieve that goal, government, there are many things to do for the government. especially the government has to

promote infrastructure development. and also to create employment. and export not only natural resources, but also other goods. and also the government has to attract foreign investment. the government has to make a good investment environment. >> now, let's turn our focus to an industry that's been making lots of headlines. in the last few years, smartphones and tablet computers have been flying off the shelves. their huge popularity has brought the mobile and pc industry to a turning point. now here you can see just some of the products that have become big hits with consumers. apple of course is the market leader. thanks to its game-changing iphone and ipad. south korea's samsung has followed by launching devices such as these ones, that use

google's android operating system. this put it into direct competition with apple. apple has sued samsung, claiming the products are too similar to its goods. last month a german court ruled in favor of apple, banning sales of samsung's galaxy tablet in germany. let's look at what's been happening in the market so far. >> apple has filed similar suits in several european countries, as well as in the united states, australia, and south korea. the relationship between apple and samsung began in a spirit of cooperation. the south korean company supplied many of the components used in apple's devices. but that relationship soured when samsung began making its own smartphones and tablet pcs. the two companies are now lock in head-to-head competition. although samsung does not

disclose its smartphone sales figures, it's estimated that the south korean company sold 19.2 million units worldwide in the second quarter of this year. up six times from the same period last year. closing in on apple's 20.3 million units. apple's products used the company's proprietary operating system, while samsung uses google's android. so the news that google bought mobile phone motorola was a shock. google has entered the hardware fray, putting it into direct competition with samsung and other hardware makers. google says its android os will remain open to other makers. >> first, everything that was great about windows 7. we took that and we made it even better. >> meanwhile, microsoft, which has been the leader in the pc industry, said last tuesday, that it will enter the tablet

computer market. microsoft's next-generation windows 8 os will be touch-panel operated and thus usable on tablet computers. on wednesday, semiconductor giant, intel announced it will join forces with google and support android. intel is now aiming to work with google to develop the android software. it's hoping to recover lost ground by partnering with google. the phenomenal spread of smartphones and tablets is causing all computer companies to rethink their basic strategies. >> let's now go to seoul to see how south korea is responding to these latest developments in the market. nemo. >> scherrie, the news of google's purchase sent shock waves throughout south korea, home to several smartphone and tablet computer makers. while they excel as hardware

makers, south korean computer companies have not developed their own operating systems. the government announced last month it will start joint development of a home-grown operating system with firms including samsung and lg. but it will be some time before work on the os is completed. microsoft unveiled its windows 8 operating system last week and gave away 5,000 samsung tablets. running on a preliminary version of its new os. we an expert from korea telecom about the outlook for south korean computer makers. >> translator: i think it will be more advantageous for south korea not to focus on only one operating system. for example, samsung has experienced making smartphones and tablet computers, based on android and windows. and i think the value of that experience has been proven in the market. because right now, there are good reviews about the galaxy

tab 10.1, saying that it is difficult to find an android-based tablet with such high performance on the market now. it's also a sign of confidence by microsoft, that it chose samsung as its main partner for its windows 8 operating system. in terms of hardware production, south korean companies are competitive and i believe they stand a good chance of maintaining growth in that field. but there's a problem -- samsung faces many possible competitors from taiwan, china and japan. catching up with leading-edge hardaway technology can happen much faster than in the software field. we are worried that taiwan and china may catch up with samsung and hardware faster than samsung can catch up with google, apple and microsoft in software.

>> and that's our report from south korea, back to you in tokyo, shery. >> nemo, thanks. here with me in the studio is michito, kimura, senior analyst for international data, japan. mr. kimura, let's start with a general overview of what's been happening in the market so far. first we have giant apple, with its own operating system, the ios, and then we have google's operating system, android. so far, google has been pairing up with samsung. but then now we see that google is buying a motorola mobility. which means it's becoming a major competitor in the market. and then we have microsoft, coming in with its windows 8, next generation operating system for tablets. a lot going on here. so how do you think the battle will play itself out? >> well, as we mentioned, in a market going to be very difficult, very complicated.

so very hard to focus exactly. but i can say firstly, yes, iphone, apple leading vendor in smartphone business industry. at the same time, google, google has the majority share on smartphone shipment basis. so that is another giant. so and google as we mentioned, it has decided to purchase motorola's mobile phone division. so google has several thousand patent, they have it, that's a very key power to defend against legal action. >> so the market is heating up. and then you see microsoft coming in. >> yes. microsoft as you know, it's a pc giant. and they decide to do business with the number one mobile phone vendor, nokia. so it could be competition among such big vendors could be

tougher. then it's a bit hard to pick up the real factor. but i have several kind of factor to say is you know, how much windows and microsoft can gain in the mobile phone, smartphone market in the short-term. that is a point i really want to watch closer in the short-term. >> if the market show. and smartphones are very different from conventional electronics product. in that they need to pair up with telecom carriers. what other factors are at play in the industry? >> the mobile phone industry is a bit different from the conventional electric industry. aside from the vendors, it's a client user. this is the main client customer. but at the same time they have to watch closer to the move of operators. because amongst all the handset through the telecom channel. so we can say a mobile vendor

has two kind of clients. so i think it's very close relationship. that is a key. this is no change at all from the past. >> and asia has been manufacturing, providing components for smartphones and tablets. we're seeing that they could also become consumers. will this change? will this trend change? >> yeah. i think it's in terms of smart phone market and tablet market. asian region has played an important role in production. but smartphone market, in america, western europe, japan, korea, the smartphone market share is already leading to more than 50%. one out of two becomes already smartphone. the market is going to be mature. so that's why this is the first stage. the next stage, i think asian market. we have to focus on. because asian market is a huge population or huge demanding. so that's why i think many, many

operators, vendors, well definitely go make more focus on this region. because having emerging markets. >> mr. kimura thank you very much for joining us. >> thank you very much indeed. for the latest from china, we have julian luke in hong kong. julian? >> hi, shery. the chinese cosmetics market has been growing at double-digit rates since 2005. and there is intensifying competition among american, european and japanese cosmetics companies to get seen on this burgeoning market. last wednesday, saw japan's shiseido commemorate its 30th anniversary in china, with a contest in shanghai for aspiring young models and makeup artists. the 16 models and 18 makeup

artists who took part were chosen from more than 3,000 applicants from across the country. the winning model will be futured in shiseido ads in china. while the winner in the makeup artist contest will be given a chance to study at a japanese beauty school. concerns over the u.s. and european economies are factoring growth prospects in asia. on wednesday, the asian development bank lowered its 2011 growth forecast for 45 asian countries and regions, from the 7.8% predicted in april, to 7.5%. this includes japan, australia and new zealand. china's projected economic growth for this year was downgraded from 9.6%, to 9.3%. largely due to lower demand from its european trading partners. in india, there is major concern over inflationary pressure caused by soaring food and fuel

prices and rising wages. the bank lowered its estimate for india's growth this year, from 8.2%, to 7.9%. noting that, exports have been powering the growth of emerling asian economies. the adb set an economic slowdown in industrialized nations has put the brakes on this trend. and that's our report from hong kong. back to you in tokyo, shery. >> julian, thanks. suzuki motors says it wants out of its nearly two-year partnership with volkswagen. the japanese firm announced last week that it would seek to end the union, asking volkswagen to unload its suzuki shares. >> last week, suzuki's board of directors decided to scrap the company's capital tie-up with volkswagen. due to concerns by the japanese car maker that it was losing its independence.

>> translator: we thought that we had made it clear about our need to be treated as an independent company. volkswagen, however, does not seem to have understood this. if we were to continue with the alliance in its present state, there would be a negative influence on suzuki. >> volkswagen holds a nearly 20% stake in suzuki. while suzuki owns a 1.5% of volkswagen. the german car maker says it has no plans to sell its stake in suzuki. while the japanese company hopes to buy back its shares that are held by volkswagen. the companies joined forces in 2009. establishing one of the world's biggest and, they said most promising auto alliances. volkswagen and suzuki said they would work together to expand market share in emerging economies and develop ecofriendly technology. but signs of trouble start odd to surface in july.

suzuki expressed frustration with its partnership. saying the german automaker was treating the japanese company as a subsidiary. volkswagen released a statement on september 11th. saying suzuki violated the terms of their partnership, by agreeing do buy diesel engines from another car maker. suzuki denied the allegation. >> translator: instead of criticizing each other, it is better to look back at it with a smile and say, it wasn't meant to be. >> now looking back with a smile may not be that easy. on sunday, an unnamed volkswagen executive was quoted as saying it's possible that german car maker may initiate a hostile takeover of suzuki. let's turn now to other news from around asia. >> the roo serve bank of india decided at its monetary policy meeting on friday to raise the key lending rate to 8.25%.

the highest the rate has been since 2009, when it reached 9%. the rate hike is this year's fifth, as inflationary pressures continue to rise. the wholesale price index came in at nearly 10% on wednesday. amid worries of a global economic slowdown, attention is now focused on whether the central bank will raise the rate again. in the april-to-june period, the indian economy posted the slowest growth figures in 18 months, 7.7%, year on year. malaysian automaker prodon unveiled its first batch of electric cars on wednesday. proton took three years to develop the vehicles, which were designed by italian firm, jijaro. the company chairman handed over the eight cars. which comprise two models, to the prime minister's office. and four other government ministries for testing. mass production of the vehicles is set to begin in two years.

the australian bureau of statistics said on thursday, new car sales in august totalled nearly 88 thundershowers units, up 4.4% from a year earlier. sales of sports utility vehicles jumped just over 10%, while those of passenger vehicles rose 1.2%. and that's all for this edition of "japan biz cast." i'm shery ahn and see you again next week.

>> "california's gold" is produced in association with kcet los angeles and is seen statewide on california public television. this series is endorsed by--