HONG KONG — Beyond the threatened Hollywood strikes, Asia could prove to be the wild card at this week’s American Film Market.

As a region, Asia, certainly nowadays, has the economic muscle to make a world of difference. It boasts the globe’s No. 2 and No. 3 economies in Japan and China, and six of the top 10 countries by population — but has not yet thrown its full weight around in the movie-buying biz.

This year’s AFM sees the region demonstrating the surging growth of developmental reach and the willful self-absorption that comes with regulation (in China’s case) or homegrown success (in Japan’s). In between, meaning South Korea and Hong Kong, there are struggles for new direction.

Japan, the world’s second largest entertainment market, is proving difficult to read. Over the last 18 months, top local films have played very strongly, which is diminishing the need for acquisitions on the open market. Imports, including brand-name studio fare such as the latest “Harry Potter” film, have performed less strongly than previous franchise properties.

With production levels approaching 400 movies per year, the majority still very low-budget, distributors and exhibitors are swamped. Theater owners have responded to Japan’s statistical deficit in cinema screens per capita by building multiplexes. In places like central Tokyo, they have added flexible miniplexes. But the investments have yet to see much of a return, as total B.O. has failed to grow and the nation’s screens have been swiftly filled with more local films and wider releases for blockbusters. Lead times between an acquisition agreement and getting a pic onto screens can still be nine to 18 months.

Unsurprisingly, many distribs have already published their 2008-09 release schedules — catalogs intended to woo sponsors and marketing partners and which are often as glossy as an issue of Vogue — and they are looking to AFM to provide content for the end of next year or 2009.  

With Nippon screens full for the foreseeable future, the Japanese buying delegations trolling the Loews corridors are unlikely to be as large or aggressive as in some previous years. “Japan has replaced South Korea as the big Asian territory that’s now in a position to close the door to imports,” says one production finance exec.

That has forced indie market sellers and studios alike to adopt new tactics and become more involved in the local production or distribution sector. The highest-profile example is Universal Pictures Japan. It recently became the first Hollywood company to lead a Japanese production consortium when it boarded Shochiku’s $10 million actioner “Midnight Eagle.”

An impenetrable Japan is a worrisome image within Asia, where Japanese buying propelled the Korean Wave of 2000-05. That picture was reinforced earlier in October when Japanese buyers largely forsook the Pusan market. Some apparently traveled to Mipcom, others stayed home.

But there are signs that the isolationist bubble is beginning to deflate, not least the dip in market share for Japanese pics in the first half of 2007.

“Things are evening out a bit now,” says Winnie Lau, Fortissimo Films’ sales VP who specializes in selling to the Japanese market. “Japanese companies are looking to more co-productions again, and stars are increasingly willing to travel in support.”

Summit’s David Garrett also makes an even less flattering comparison with Korea and warns: “When Korean audiences realized that it was not about films being from Korea, but being good movies, the tide turned. Exactly the same will happen in Japan very soon.”

“Japanese companies are still not really doing many prebuys, but there are the usual exceptions,” Lau says, pointing to the highest-profile indie projects.

Projects with music themes or star names, such as Leonardo DiCaprio and Tom Hanks, tend to work particularly well in Japan and can still command premium prices. Knowledgeable sales agents with the right titles are still able to conduct auctions.

Significantly, it seems that after the success of local films, Japanese auds are now more appreciative of their own talent. International projects that cast Japanese stars such as last year’s “Babel” are in high demand and distribs are willing to consider investment positions, rather than simple buying roles.

Still, two other fear factors haunt the Japanese buyers: the ever-shrinking DVD market, down for the fourth year in a row, and the unknown impact of the online distribution sector.

With tens of millions of households around the world now hooked up to fast broadband connections — especially in northeastern Asia and the U.K. — Internet startups and giant telcos alike are moving into the online feature film distribution field.

But it is not clear when these will start to become a significant buying force. Japan counts some of the biggest companies in the sector with GyaO, Yahoo BB and video-on-demand players like Ondemand TV.

GyaO sources its content from Gaga, U.S. majors and indies and from other Japanese distributors who have struck all-rights deals. But as long as the service is in its infancy, its pitch may be contradictory. As of Oct. 1, it had 16 million subscribers, but it is still struggling to convince advertisers that anyone is watching.

“The price of Internet rights within Gaga’s buying equation is not significant,” says Amanda Nakamura, an acquisitions exec who made the switch from Gaga to GyaO. “But our marketing effect is big. If in cases when it looks like we can do a lot of promotions for a film, (Gaga’s) decisions will be easier.”

Similarly, not every seller is convinced that the revolution has arrived yet. According to QED’s head of sales, Kim Fox, sellers are having to give some ground: “In order to get the revenues we want, we are having to do deals of 12 years or more in primary territories. Before, we may have done terms of seven or eight years.” Fox says QED has turned down offers to split out rights in different media and is sticking to all-rights deals.

Elsewhere in Asia, buyers’ attitudes are split between the developed and the developing markets.

India, Malaysia, Indonesia and Vietnam are all adding screens and seeing distribution options expand thereafter. Aggressive Indian buying is becoming a factor for many sellers. The surge is driven also by the impending launch of two or three world cinema TV channels in India.

Korean buyers are quieter, either with less money to spend, or in the case of independents, less sure of getting screen space they want.

The Hong Kong market is stuck at a different point. Scarcely any category of movie — local, mainland Chinese, other Asian or Hollywood — is a bankable success.

“We have been buying Korean films since 1999, but now it is increasingly difficult to find ones that can cross borders,” says Audrey Lee, acquisitions VP at Hong Kong’s Edko Films, who attended the recent Pusan market but flew home empty-handed.

“We may have to turn to other Asian films and Hollywood pictures to fill the gaps,” she says, adding Edko is open to European films, and she points to strong business done by “The Queen” in Hong Kong.

“If the French started making more films in English, they’d do better here,” she says.