TOKYO -- Mazda Motor Corp., awash in excess production, has given its 30,000 workers in Japan mandatory extra days off last week and this week, days when they can reflect on a question being asked from Washington to Hiroshima: How bad can the Japanese economy get?
Traders in the Japanese financial markets have had a simple answer since September: worse.
Wednesday, share prices fell broadly and steeply, continuing a three-month trend. Yesterday, the benchmark Nikkei index plummeted further, hitting a 10-month low. The index ended the week at 16,726.37, the first time it had closed below the psychologically important 17,000-point level since early March.
"Nobody thinks this economy is getting any better, so nobody wants to buy shares in the Tokyo Stock Market," said Yukinori Yamamoto of Nikko Securities. "It's bad, bad, bad."
The gloom is not evident at street level. The major department stores in Tokyo's famous Ginza District are packed with merchandise and shoppers. The retail cost of commodities with a high import content, such as beer and coffee, hasn't budged, despite an almost 20 percent increase in the value of the yen this year, suggesting that some operations are enjoying fabulous margins and haven't felt the need to boost sales by reducing prices. Movie theaters in central Tokyo continue to draw crowds, despite ticket prices of $20 to $25.
Unemployment, perhaps the most important economic indicator, remains negligible. But signs of shifting sentiment abound.
Wednesday, dozens of kimono-clad proprietresses of "ryotei," private restaurants famous for serving $1,000 meals to whispering politicians, marched on the Diet to complain about the austerity that has dramatically cut business.
Business entertainment expenses have been radically pared by many companies, with tight one-hour lunches replacing lingering evenings. Travel agents report that exotic trips overseas are suddenly unpopular, despite the fact that the appreciation of the yen makes them all the more affordable.
The first shipment of Beaujolais Nouveau, an event that just a few years ago brought throngs to the airport, arrived last week with little fanfare other than nostalgic sighs for a bygone era.
Economic surveys emphasize deepening problems. Car sales havedeclined for 13 consecutive months, supermarket sales for 14 consecutive months. Inventories are growing in textiles and common electrical appliances such as air conditioners.
Yesterday, the government reported that disposable income for the households of salaried workers rose 0.6 percent but that spending declined 0.8 percent.
Underlying the reluctance to spend may be fear. A survey of 100 major Japanese companies by the Kyoto News Service concludes that 60 percent have cut or will cut their work forces. Companies that geared up during the 1980s for better times ahead are the most battered today.
Mazda invested in array of elegant new models, only to have them become available just as the Japanese decided the economy was too shaky to justify buying.
Meanwhile, the strong yen has severely undermined exports. The carmaker forecasts $300 million in losses for the current fiscal year, which ends in March, and has started taking strong measures to cut capacity. In addition to the temporary companywide shutdown, it will deactivate a 100,000-unit a year production line in its big flagship plant in Hiroshima.
The country's second-largest automaker, Nissan Motor Co., will close for two extra days next month and also is cutting capacity.
Any problems in the auto industry, responsible for about 10 percent of Japan's gross domestic product, tend to have a ripple effect. Steel makers, hurt at home by declining orders from their largest customer and similarly disadvantaged by the high yen, are cutting back on employment and considering shutting down blast furnaces temporarily.
Better news may be in the offing. A large government spending package has been approved, but implementation has been delayed by scandals in the construction industry, said Robert Feldman, an economist at Salomon Brothers.