Japanese economy staggers

Doom-laden report set to trigger new Asian collapse

A year ago From The Register April 1998 Far Eastern stock markets and currencies plunged again today on the news that Japan's economy is near collapse. The new crisis was triggered by a damning Bank of Japan report on the state of the economy, together with an angry attack by Sony president Norio Ohga on prime minister Ryutaro Hashimoto's handling of the economy. Japan, he said, was close to collapse, may go into a spiral of deflation. The country is in its most serious situation ever and, he said, there was a danger of triggering world-wide recession. At time of posting the yen had hit a six year low against the dollar, and currencies elsewhere in Asia were following suit. The Bank of Japan quarterly 'Tankan' survey of the economy meanwhile revealed that its gauge of business confidence had fallen to minus 31, from minus 11 in December, and that investment, output and employment had all fallen. According to the Singapore Business Times Japanese shops have also begun marking prices in dollars as well as yen, showing public distrust of the currency, and showing how one recent liberalisation measure at least has backfired. The Japanese government recently made it easier for the public to obtain foreign exchange. The government has already promised a near-$200 billion reflationary package, but this is now seen as being inadequate, particularly as previous attempts have included large sums for unnecessary construction projects, and have simply had the effect of stopping construction companies going bust, rather than helping the economy in general. Europe and the US have meanwhile been lobbying for stronger measures to boost consumer spending, and the Bank of Japan's latest blow may at last prompt stronger government action. Japan's troubles will certainly ripple further through Asian stock markets today, and will likely make matters worse for its neighbours, particularly Korea's embattled chaebols. But the real threat now is clearly to Japan itself - in the crisis last year Japan seemed to stagger, but it was generally thought it had the resources to restructure and move on. But as the head of Sony has lost confidence in the government, now thinks this isn't automatically going to be the case, and is prepared to say so publicly, the rules have changed. ®

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