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Japan Releases More Sobering Economic Statistics - 2003-06-06


The Finance Ministry says capital investment by Japanese corporations fell three percent in the first quarter, compared with the same quarter of 2002.

The survey also shows that average corporate profits rose 10 percent in the first quarter compared with a year earlier. But that is actually a much smaller increase than the 23 percent jump in the previous quarter.

Analysts say the statistics suggest companies are only managing to improve profitability by cutting costs and trimming capacity, but are not making new investments in equipment or plants.

Japan Research Institute senior economist Hisashi Yamada does not see capital spending increasing any time soon. Mr. Yamada says further deregulation and incentives are needed to help existing businesses and to create a better environment for entrepreneurs.

The Finance Ministry also reports large Japanese companies are more pessimistic about the outlook for the economy than they were in the first quarter of the year. The bleaker mood reflects worries about the strengthening yen, which hurts exports, and the effects of SARS on the region.

The outbreak of Severe Acute Respiratory Syndrome, as well as the effects of the U.S. led war in Iraq, has weakened Japan Airlines. Asia's largest carrier says it will seek 17,000 volunteers to take a month's leave without pay. It is the first time a major Japanese company has called for such across-the-board furloughs.

Europe's top automaker is launching a new passenger car in Japan. Volkswagen, which sold 60,000 autos in Japan last fiscal year, says it will soon release the convertible version of its Beetle.

Volkswagen Japan President Tsutomu Umeno told TV Tokyo that his company wants to increase its market share in the competitive Japanese market. Volkswagen holds the biggest share of the market for imported cars in Japan and expects to capture about 24 percent of the market this year.

Intel, the world's largest chipmaker, is investing $100 million in Elpida Memory. The deal gives Intel a stake in the struggling chip maker, but the size of the stake has not been reported.

Elpida is a joint venture between Hitachi and NEC and is Japan's last big maker of standard computer memory chips. The Japanese partners also say they will inject more money into the unprofitable company, which has promised to turn a profit by 2005.

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