-Caveat Lector- Some of the information repeats what has already been posted. I notice the prevalence of the reportage throughout the various organs of the media (i.e., many have the stories), some of which may differ slightly, giving a more complete picture. 1>>In Japan, a Slump That Won't Quit 2>>Uncompetitive Industries Undermine Stimulus Plans >From Int'l Herald Tribune Paris, Saturday, December 26, 1998 In Japan, a Slump That Won't Quit Jobless Rate Rises to Record; No Economic Rebound in View ------------------------------------------------------------------------ Compiled by Our Staff From Dispatches ------------------------------------------------------------------------ TOKYO - A series of reports Friday showed that Japan's economy continued to crumble last month, with the unemployment rate rising to a record high and no indication that the country is poised for a rebound. The Management and Coordination Agency said Japan's unemployment rate rose to a record 4.4 percent as corporations cut payrolls and suffered a wave of bankruptcies. In addition, government figures for November show that industrial output is sliding and that sales at department stores are slumping. A report from financial authorities also shows that Japan's troubled banks have even more bad loans than previously thought. (Page 9) The unemployment rate was the highest since the government started keeping track in 1953. It had been stable at 4.3 percent for three consecutive months to October. For the first time, the unemployment rate in Japan equaled that of the United States, where the jobless rate also was 4.4 percent in November. While in Japan the rate is a record high, in the United States it is one of the lowest rates in 30 years. Some economists, however, argue that Japan's joblessness is probably higher than the official figure states because unemployment is narrowly defined. The International Monetary Fund said in a report released Monday in Washington that it expected unemployment in Japan to average 4.9 percent in the year through December 1999. Taichi Sakaiya, head of the Economic Planning Agency, said the situation would very likely get worse before it got better. ''There's strong pressure for the jobless rate to rise,'' said Mr. Sakaiya, one of Japan's top economic planners, adding that the rate was viewed ''with grave concern.'' Large companies in Japan generally reduce excess labor by hiring fewer university graduates and offering early retirement packages to older employees. Of the 2.9 million unemployed in Japan, 800,000 are aged 24 to 34 years, and 550,000 are between the ages of 55 and 64. The news was no better for Japan's once-mighty manufacturers. Industrial output at factories and mines in November fell a larger-than-expected 2 percent compared with the previous month, the Ministry of International Trade and Industry said. The fall was considerably larger than forecast by private economists and the government. While the ministry predicted there would be a 0.3 percent rebound in production in December, it agreed with other forecasters that a recovery was not yet in sight. ''There still isn't enough data to indicate that the economy has hit bottom,'' the ministry said. Meanwhile, the Trade Ministry also reported that sales at major department stores and supermarkets fell 1.5 percent in November from a year earlier, the seventh straight month of declines. Also on Friday, the Japanese government approved a record budget of 81.86 trillion yen ($705.84 billion) for the year to March 31, 2000, officials said. The budget, adopted at a special cabinet meeting and pending approval by Parliament, is up 5.4 percent from the initial outlay for the current fiscal year ending March 31, 1999. The government aims to haul Japan out of recession with the huge budget and achieve 0.5 percent growth in gross domestic product, although 37.9 percent of spending will be paid for by government debt. This year the government has approved two stimulus packages worth a combined 40 trillion yen, and it has set up a fund of 60 trillion yen to deal with the banking crisis. The economy has contracted for four consecutive quarters through September, and Tokyo estimates the economy will shrink 2.2 percent in the year through March. ~~~~~~~~~~~~~ Paris, Saturday, December 26, 1998 Uncompetitive Industries Undermine Stimulus Plans ------------------------------------------------------------------------ By Sandra Sugawara Washington Post Service ------------------------------------------------------------------------ WAKAYAMA, Japan - The mystery of why Japan's economy continues to sink, despite a series of costly government rescue attempts, can be explained here in this seaside town south of Osaka. A gleaming mass of pipes and towers looms over the waterfront, where Wakayama Petroleum Refining Co. converts crude oil into heavy fuels and lubricants. Down the road, Sumitomo Metals Industry Co. makes steel sheets and bars. Once oil and steel were major engines of growth here. But now, with demand slumping and prices tumbling, the steel mill has scaled back production and there is talk of shutting the refinery. Japan, along with the rest of the world, has too many steel mills and oil refineries. In fact, Japan has a staggering overcapacity in a vast array of industries, dotting the landscape with more bank branches, gas stations, construction companies and automakers than the nation and its global customers can support profitably. This excess is, in part, the legacy of the nation's once successful export-driven strategy to become a global economic powerhouse. But since the end of the Cold War, Japanese exporters have had to face a host of new competitors as many developing nations have pursued export-led economic growth strategies. Meanwhile, demand for Japanese exports has shriveled for more than a year because of the continuing economic crisis afflicting several Asian nations. As a result, the Japanese economy continues to shrink, depriving other Asian economies of a critical market for their exports, prolonging the financial turmoil in the region and threatening the global economy. Elsewhere, overcapacity is driving corporations to merge at a furious rate with the aim of cutting costs and becoming more competitive. This is the motivation behind the planned merger of Exxon and Mobil, NationsBank's purchase of BankAmerica, and Daimler-Benz's acquisition of Chrysler. But Japanese executives, unlike their American counterparts, are judged more by their ability to protect their employees' jobs than on maximizing profit, and banks are considered strong if they can protect their major clients during tough times. So while many Japanese companies have announced restructuring plans, it is unclear if these efforts will shrink overcapacity here. For example, Nippon Oil Co. and Mitsubishi Oil Co. are merging to create Japan's largest oil company, although U.S.-style layoffs and plant closings are not expected. When Exxon and Mobil announced their intended merger, they included plans to cut 9,000 jobs. But Japanese executives and government leaders remain paralyzed, apparently incapable of abandoning the strategies of the past, such as trying to stimulate economic activity by building unneeded bridges and repaving underused roads. In Wakayama, for example, the nation's year-long recession is evident in the empty shops and pubs. ''Even the bars are hurting. People don't drink as much,'' said Katsumi Ogawa, a 64-year-old taxi driver. But city officials have only one plan on the drawing board - construction of a 6.9-mile (11-kilometer) bridge that would link Wakayama with Shikoku, a sparsely populated island, at a cost of more than $4 billion It is unclear what kind of businesses might be lured to Wakayama as a result of the bridge. ''Perhaps tourism?'' one city official said. Underlying Japan's economy is a colossal economic structure designed to supply the world. Its benefits and perils are well illustrated in the coastal city of Hitachi-town, home of Hitachi Ltd., the nation's largest maker of electronic equipment. The town's ups and downs have followed those of the global company, which has 975 subsidiaries that produce televisions, automotive equipment, semiconductors, computers and other goods. Hitachi has been a highly respected symbol of traditional Japan, embodying the culture of lifetime employment and export-led growth. So the recent announcement that it expected a loss of about $2 billion in the year ending March 31 - its first annual loss in 48 years - shook the country and reverberated loudest in Hitachi-town. The town's port bustles with huge cargo ships, loading and unloading supplies for the sprawling Hitachi plants there. About 80 percent of the 700 independent companies in town depend on work from Hitachi. If Hitachi's business recovers, Hitachi-town probably will thrive again. But if the world no longer wants all those products, what will the town do? That's the question now facing all of Japan. The nation has two choices. The first, advocated by many international economists, is to close unneeded factories, allow inefficient companies to go bankrupt, deregulate the economy, open its markets and hope that out of the ashes of this collapse will spring new business. Nikko Securities Co. estimates that Japanese companies have an excess of 2.55 million workers, so a crash could send unemployment surging to 7.9 percent. Many more banks would probably collapse, because most of the excess investment was funded by bank loans. Economists say the crash could be followed by creation of new jobs if workers and capital are freed to flow to sectors where there is demand. For example, Japan's birthrate is plunging, but its elderly population is growing. So, one economist said, resources should be flowing to the growing elderly market instead of into new housing. The second option is to use public funds to try to keep struggling companies and banks alive in the hope that robust global growth will revive Japan's export machine. Tokyo seems to have chosen the second route. The government plans to spend $495 billion to bail out its banks and is pressuring them to extend more loans to shaky construction firms, retailers and manufacturers. It is planning to spend $196 billion for public works and tax cuts, to boost construction work and spur consumer spending. The Bank of Japan also is buying commercial paper from companies that cannot get short-term loans from banks. The central bank now holds more than 40 percent of the commercial paper issued in Japan. The government-owned Japan Development Bank has been authorized to expand its lending activities as well. Merrill Lynch & Co., in a recent report, has dubbed these efforts a ''safety net for all companies.'' The fear among economists and investors is that it will create a welfare mentality among corporations, reducing incentives for them to take tough actions such as closing plants, slashing costs or cutting jobs. The government, which has pursued this strategy for eight years, asserts that the economy has hit bottom and will begin growing next year. In contrast, the Japan Center for Economic Research predicts the economy will continue to contract through 2001 and then recover. Economists warn that the government would have to increase the spending stimulus and tax cuts each year just to stand still. It is doubtful Japan can afford to do that, with the national and local government's debt now exceeding the nation's gross domestic product. ~~~~~~~~~~~~ A<>E<>R The only real voyage of discovery consists not in seeking new landscapes but in having new eyes. -Marcel Proust DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance�not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. 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