Japan's lengthy list of projects to boost economy creates little enthusiasm Skeptics doubt effectiveness of program

September 19, 1993|By Thomas Easton | Thomas Easton,Tokyo Bureau

TOKYO -- As most of Japan's workers took a holiday Wednesday to honor the elderly, government leaders were finalizing their plan to revive an economy showing awkward signs of mortality.

Faced with the country's worst economic crunch in decades, the government met only minimal expectations, producing a nearly $60 billion program including hundreds of tiny proposals and what it characterized as a push to deregulate the economy and open markets.

Under the program, public works projects will be accelerated, and more credit provided for housing and small business. Some additional money will go to schools and to disaster relief.

It should be easier to open a brewery, or remodel a home. And -- perhaps in deference to the recent holiday -- special assistance will promote the installation of home elevators for the aged.

The list seems endless -- and to the vast audience of skeptical outsiders, likely to go unread. Already, some economists have estimated the plan's size at no more than half the stated value and, as if to emphasize the point, the stock market plunged just before the announcement.

Still, even if there was little "mamizu," or "real water," as Japanese analysts say, the plan represented a drastic shift in priorities for Japan's new coalition government.

Just a few weeks ago, political, not economic, reform was the burning issue.

Another stimulus package, valued at more than twice the size of this one, had been passed in April by the previous administration, and senior officials stressed that their attention for the rest of 1993 would be focused on Japan's corruption-tainted electoral system.

But the summer's 20 percent increase in the yen has hurt domestic manufacturers already bruised by a slow domestic economy. Tuesday's announcement that the economy had shrunk during the April-June quarter at an annual rate of 2 percent confirmed a business environment characterized as a recessionary "bog" by Gaishi Hiraiwa, chairman of the powerful Federation of Economic Organizations.

Segments of the economy showing a decline included personal consumption, corporate investment and exports.

Today, outward signs of distress remain minimal. No major department store chains have gone bankrupt. The streets of the country's major cities remain clean. And panhandling continues to be rare.

But signs of economic malaise are growing.

For example, guide books warn Tokyo tourists that taxis are scarce late at night. But outside expensive hotels such as the Okura, taxis idle by the score.

Clerks at even modestly priced stores often describe their day being "hima," or free, a nice way of saying that there are no customers.

And several large foreign language schools, once necessary stops for aspiring international executives, have closed, as have some expensive "hostess" bars in Ginza -- both victims of tightened corporate spending for education and entertainment.

Hiroshi Kumagai, Minister of International Trade and Industry, says the economy can be summed up by changes at the first class Imperial Hotel, which recently shut an expensive French restaurant to open another with a hodgepodge speciality that he characterizes as "restructuring rice."

Such superficial signs may mask deeper pain. Public opinion polls show consumer confidence at its lowest levels since surveys began in 1958. Corporate profits are forecast to drop again this year, the fourth in a row.

Department store sales have declined for 18 consecutive months. Losses are expected at major steel companies, the two international air carriers and such well-known consumer goods companies as Toshiba Machine Co. and Sansui Electric.

To prevent a more precipitous decline in the economy, the labor ministry has urged major companies to maintain hiring levels. They haven't.

Toyota Motor Corp. and Nissan Motor Corp. recently announced cuts in planned recruitment, while Nippon Telegraph and Telephone Corp., Fujitsu Ltd. and Mitsubishi Electric Corp., to name just a few, are reducing employment. Komatsu Ltd., maker of giant earth-moving machines, will cut 10 percent of its work force, following a 30 percent drop in sales since the 1990 peak.

Such moves may be only the beginning. Forty percent of Japanese manufacturers have recently cut back on labor, according to a recent survey by the labor ministry.

And an equally large percentage of companies are overstaffed because of so-called "in house" unemployment, a policy of retaining unneeded employees. Many are likely to make cuts in the year ahead, a separate survey by the ministry found.

Meanwhile, other employers are avoiding reductions by re-allocating people.

Matsushita Electric Industrial Co. announced the transfer of thousands of young executives to affiliated retailers where they can work behind the counter; NEC Corp. will move 1,000 engineers from software design to sales.

Where will those sales could come from? That could be Japan's most vexing question.

Jarred by Japan's huge trade surpluses, countries increasingly appear unwilling to accept its goods. Earlier this month, the European Community negotiated a reduction in auto exports from Japan and may seek additional limits.

Similarly, the Clinton administration is pushing for definitive reductions in Japan's trade surplus with the U.S.

To pick up the slack, that leaves other Asian countries, fast-growing but also concerned by Japanese surpluses and trade practices, and domestic demand, which appears to be withering. "The outlook," said Takashi Kiuchi, economist with the Long Term Credit Bank of Japan, "is not bright. We're worried."

Indeed, even as the government was announcing its new stimulus package, Mr. Kiuchi says, the cabinet began consideration of yet another package -- larger, and with more real water.

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