Passage 2
Japan’s economy is in the most wrenching adjustment since the oil-price shock of the early 1970s. The optimists have predicted that the powerhouse economy is suffering only a temporary slowdown. Yet virtually every key indicator continues to deteriorate. The much-vaunted “soft landing” is cleaning not in the cards. Recovery is further away than many people imagine, and it will be slow and erratic when it does come.
Alarmed at the rapid asset-price inflation of the mid-1980s, bureaucrats intervened to head off a crash. Unfortunately, the economy didn’t cooperate. Asset prices tumbled precipitously, with the real estate and stock markets embarking on a steady slide that many believe has yet to hit bottom.
Japan dipped decidedly into recession as GDP fell 0.2％ in the second quarter of 1992, 0.4% in the third and 0.3% in the fourth. Industrial output shrank 6.1% last year. Now we’re starting to see bankruptcies by industrial and service companies. The recession is no longer confined to the bubble economy-it has entered the real economy.
Japanese companies do have an impressive track record of responding to crisis situations. They rebounded very quickly from the oil-price shock in 1973 and more recently offset the rising Yen by boosting productivity and shifting operations overseas.
This time around, however, they face a much harder and longer road to recovery. Recession is going to be very difficult for Japan.
The restructuring trend may itself exacerbate the problem. To try to shore up faltering profits, companies will slash capital investment and employee benefits. This in turn will further damage consumer confidence. Around 20% of Japan’s GNP comes from business investment, with a whopping 60% from consumer spending.
Consumer confidence has also been hurt by layoffs and cuts in overtime pay and bonuses. For a long time there have been more new job offers than there were seekers, but this has fallen recently. For most Japanese this is an extraordinary occurrence.
Statements:
48.As GNP fell successively and there are bankruptcies in some companies, we can say for certain that the economy is undoubtedly in recession.