Japan urges restraint

TOKYO - Thailand's biggest investor, Japan, on Tuesday expressed "grave concerns" after the army imposed martial law.

After almost seven weeks of anti-government protests, generals ordered forces onto the streets of Bangkok and troops were positioned at television stations as the army said the media would be censored.

But despite the crisis — which saw Southeast Asia's second biggest economy shrink 0.6% in January-March — analysts said the economy could bounce back.

"We have grave concerns about the situation in Thailand," Japan's chief cabinet secretary Yoshihide Suga told reporters in Tokyo. "We once again strongly urge all parties concerned to act in a self-restrained manner without using violence."

The dismissal of caretaker prime minister Yingluck Shinawatra this month in a controversial court ruling has sent tensions soaring in the country, which has endured years of political turmoil.

Red-shirt supporters of Ms Yingluck and her brother Thaksin, who was deposed as premier in a 2006 coup, have warned of civil war if power is handed to an unelected leader, as the opposition demands.

The army, which has mounted numerous coups in recent decades, insisted Tuesday's declaration was not an attempt to seize power. "This is not a coup," it said. "The public do not need to panic but can still live their lives as normal."

Private-sector think-tank Teikoku Databank said in February nearly 4,000 Japanese firms operate in Thailand, with investments the Bank of Thailand said were worth US$6.89 billion (224 billion baht) in 2013 — half of the total inward investment.

That figure is more than the next three biggest investors combined — the United States, Britain and the Association of Southeast Asian Nations (Asean).

Thailand has become increasingly important for Japanese firms as they shift operations from home to counter high wages and an overvalued yen and to mitigate the effects of natural disasters on the supply chain.

Car giant Honda said political instability was leading it to reconsider a second assembly plant it is hoping to go online in April 2015.

Spokesman Teruhiko Tatebe said: "We are watching the political situation in order to decide to go ahead with the plan (to start operations) or not. If the political situation improves, we may complete the factory and start production."

And Toyota, the world's biggest automaker, also said it was watching events carefully, but added all three of its plants were operating normally. "The morning shift started as per usual at all plants. A decision concerning the evening shift will be made based on the situation," a spokesman said.

Analysts said the economy was largely immune to shocks — a legacy of decades of political uncertainty.

Invesco fund manager Jalil Rasheed told Dow Jones Newswires: "Thais are so used to having tanks on the streets." He added that from a markets perspective, "the largest participants are local retail investors, who have been through this before".

And Andrew Colquhoun, Fitch Ratings' head of Asia Pacific sovereign ratings, said the move could actually help break the long-running political deadlock.

"The key factors for the ratings are whether Thailand can avert more serious and bloody political disorder, and whether we see a return to a fully functioning government that is able to make policy and pass a budget," he said.

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