TOKYO: Thailand’s biggest investor Japan on Tuesday expressed “grave concerns” after the army imposed martial law, with the United States saying it must only be “temporary” as multinational firms monitored events nervously.
After months 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 percent 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 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 Yingluck and her brother Thaksin Shinawatra, 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.”
Thai stocks slip
Nearly 4,000 Japanese firms operate in Thailand, think-tank Teikoku Databank said in February, with investments the Bank of Thailand said were worth $6.89 billion 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 Thai assembly plant it is hoping will 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 [1to start operations] or not. If the political situation improves, we may complete the factory and start production.”
Toyota, the world’s biggest automaker, also said it was watching events carefully, but added all three of its Thai 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.
Washington urged “all parties to respect democratic principles, including respect for freedom of speech.”
US State Department spokeswoman Jen Psaki said in a statement: “We understand the Royal Thai Army announced that this martial law declaration is not a coup.
“We expect the Army to honour its commitment to make this a temporary action to prevent violence, and to not undermine democratic institutions.”
Indonesia, the Philippines and Australia also expressed concern and called for a democratic solution to Thailand’s crisis.
But market reaction was tempered. The Stock Exchange of Thailand sank 1.58 percent on opening before picking up slightly to sit 0.84 percent lower. The baht dipped to 32.57 against the dollar from 32.47 baht on Monday.
Analysts said the economy was largely immune to shocks—the nation has long been nicknamed “Teflon Thailand” for its record of economic resilience in the face of political upheaval.
“Thais are so used to having tanks on the streets,” Invesco fund manager Jalil Rasheed told Dow Jones Newswires.
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 army’s move to introduce martial law 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.