Asian Financial Crisis Trickles Down
When Thailand's economy, once one of the strongest in Asia, collapsed under the weight of foreign debt in 1997, its downfall set off a chain reaction in the region, sparking the Asian currency crisis. While far from completely recovered in 1998, Thailand appeared to be in better condition than many of its Asian neighbors, whose financial downturn provoked political upheaval.
When banks in Indonesia failed and the value of the country's currency plummeted, anti-government demonstrations and riots broke out in early 1998. As food shortages and unemployment overwhelmed the nation —the fourth most populous in the world— President Suharto's ouster was demanded. On May 21, 1998, Suharto stepped down after 32 years of authoritarian rule and crony capitalism and was replaced by his little-known protégé, B. J. Habibie.
South Korea's currency also underwent a massive devaluation in 1997, and the subsequent political instability brought Kim Dae Jung to power in February 1998. Once imprisoned as a dissident, Kim became the first South Korean president ever elected from the political opposition.
In fall 1998, disagreement over how to rectify Malaysia's economic downturn led Prime Minister Mahathir bin Mohamad to denounce and jail his heir apparent, Anwar Ibrahim, inciting protests throughout the country.
But the international community was most alarmed when Japan's economy, the world's second-largest after the United States, began experiencing its worst recession since World War II, leading to the resignation of Prime Minister Ryutaro Hashimoto in July 1998. Japan's uncharacteristic vulnerability augured the development of the Asian crisis into a global one.