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Dismal Forecasts Signal Japan’s Recession Has Already Set In

February 21, 1992

TOKYO (AP) _ A string of gloomy profit forecasts and revised assessments of economic growth suggest recession may be tightening its grip on Japan.

Electronics giant Toshiba Corp. on Thursday joined Sony Corp. and other Japanese firms that have published dismal earnings forecasts for the fiscal year that ends March 31.

Those predictions come amid reports that economists are reassessing claims that the economy expanded for a record 57 straight months from December 1986 until last September - a boom that made Japan seem invincible while other major industrialized countries struggled with recession.

The slowdown in Japan isn’t necessarily good news for Americans hoping for an edge over a key trade competitor. Signs of a modest U.S. recovery increase the likelihood Japan will compensate for the slowdown at home by increasing its exports.

″If the economy goes down the drain, Japanese companies are going to try to export their way out,″ said Richard C. Koo, senior economist at Nomura Research Institute.

In a customary gesture symbolic of the times, the president of Yamaha Corp., the world’s largest maker of musical instruments, resigned this week to take ritual responsibility for a prolonged business slump.

Toshiba announced Thursday that it expected its pretax profit to fall 60 percent this fiscal year to $544 million from $1.36 billion, the year before.

Sony Corp. also has slashed its earnings forecast for the fiscal year, saying it now expects an 80 percent decline in pretax profits to $183 million for the parent company and its first ever loss from operations of $158 million.

Industry analysts have lowered earnings estimates for many major Japanese corporations.

Nippon Credit Bank Ltd. predicted Wednesday that corporate spending for new plant and equipment in the fiscal year beginning April 1 would fall 1.3 percent from a year earlier, contributing further to the slowdown.

Months after many private economists began pointing to swelling inventories, record numbers of bankruptcies and lagging capital investment as signs of trouble, government economists were still referring to the prolonged economic boom as evidence that Japan still was shrugging off recession.

Although the government has stood by an official forecast of 3.5 percent economic growth for the fiscal year, most economists predict that growth will not top 3 percent.

Officials at the Economic Planning Agency would not confirm a report Thursday by the mass-circulation Asahi newspaper that the rate of economic growth began to decline in April, rather than in October as had previously been reported.

But the EPA officials did not deny the report, which they said was apparently leaked to the newspaper by an inside source.

Shigeru Sugihara of the agency’s statistical research department said the government was still analyzing relevant data.

The private Taiyo Kobe Mitsui Research Institute recently issued a similar report that faulted the government’s criteria for estimating the length of economic booms as arbitrary and hasty.

Kenneth S. Courtis, strategist at Deutsche Bank in Tokyo, said the government’s reluctance to acknowledge the economic slowdown stemmed from its concerns that corporations would take the news as a signal to rein in even further on their investment.

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