Japan Inc. in Trouble
A raft of bad news has been coming out of Japan lately, with bad jobs and manufacturing data released today, so let's take a look at what's going on.
This morning, Japan's government said that national unemployment jumped from 3.9 to 4.4 percent in November. That seems low for us -- unemployment is 7.2 percent in the United States -- but for nearly-full-employment Japan, that's a shock.
Also released today: Factory production in November plunged 9.6 percent, the biggest drop since the government began keeping the statistic in 1953.
Japanese semiconductor giant NEC said today it is cutting 20,000 jobs worldwide -- half of them in Japan -- so you can expect that unemployment number to keep rising.
Other Japanese giants -- Sony and Toshiba -- are cutting jobs as earnings drop. And Honda today said its third-quarter earnings were down 90 percent, although, amazingly, that's not as bad a dive as analysts were expecting. Japan's No. 2 automaker cut its 2009 forecast by more than half.
What's going wrong?
First, Japan makes a lot of things that are meant to be bought -- TVs, audio equipment, chips and so on -- that nations in recession simply are not buying. Japan is the world's second-largest exporter after the United States.
Second, Japan's yen has been strong for some time, which raises prices for its products overseas and reduces demand. Auto analysts' rule-of-thumb on the yen goes like this: Every one-yen appreciation against the dollar reduces Toyota's earnings by $450 million.
Japan is fearful of slipping into another "lost decade," the name given to the period from 1991 to 2001 marked by stagnant growth, caused by a number of poor policy decisions following the collapse of Japan's go-go '80s economy.
January 30, 2009; 10:53 AM ET
Categories: The Ticker | Tags: Honda, Japan, NEC, Sony, Toyota
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