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Global Economic Slowdown Hurting Japanese Companies - 2002-03-01

One of Japan's largest retailers has unveiled a fresh restructuring program and the country's major electronic manufacturers are expecting massive losses.

Heavily indebted Japanese supermarket chain, Daiei, has announced a new three-year restructuring plan. Under the terms of the deal, creditor banks will supply nearly $4 billion in financial support. In addition, Daiei will cut 1,400 jobs.

Ron Bevacqua is a senior economist for Commerz Securities in Tokyo. He and many other analysts say they are disappointed with the plan - the second this year for the ailing retailer.

"You have got to close down Daiei. They create excess capacity, which is the main cause of deflation. They waste capital and are inefficient. But if you close them down without any alternative, you simply end up with higher unemployment and an even worse economy, so you have got to find a way at the same time to create new opportunities to use capital, to use labor to create new employment and new demand," he said.

The global slowdown in the information technology sector continues to weigh on Japanese companies. Hitachi and Mitsubishi Electric - both giants in the industry - say they have slashed annual earnings forecasts and plan to cut more jobs.

Hitachi has said it predicts a record net loss of $3.6 billion - more than double its earlier estimate. The nation's biggest maker of electrical machinery will also increase lay-offs to 21,000 workers. Meanwhile, Mitsubishi forecasts a net loss as well, reversing an earlier profit prediction.

Nissan, Japan's third largest automaker, has unveiled the first car jointly developed with its partner Renault of France. The subcompact car, called "March" in Japan and "Micra" in Europe, is a remodeled version that is powered by an ultra low emission engine. It is also equipped with six airbags and an advanced communications system.

Next week, the Bank of Japan will release wholesale price data for February and the government will announce preliminary GDP numbers for the last three months in 2001.