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Japan's Economy Slowly Recovering; Bid Rigging Scandal Rocks Trading House - 2002-08-30

The Japanese economy shows signs of improvement even though unemployment remains high, and a trading house comes under investigation for a bid rigging scandal.

There is more evidence that strong exports are supporting Japan's economic recovery. The Cabinet Office says gross domestic product grew by half a percent in the April - June quarter, compared to the previous three-month period.

The government says domestic demand remains slow, but overseas sales of cars, high-tech products and other goods rose almost six-percent in the second quarter of the year. The news confirms that Japan is emerging from its longest recession in half a century.

Despite the general improvement, however, Japan's jobless rate remained above five-percent in July for the 13 straight month. The Labor Force Statistics Office said the rate was 5.4 percent, which was unchanged from June.

That adds up to 3.5 million people out of work, 220,000 more than the same month last year. Unemployment peaked last December at 5.5 percent, the highest ever recorded.

Japanese media reports say that trading house Mitsui is under investigation for bribery. It allegedly paid a Mongolian government official to win a power project funded by the Japanese government. This is the second scandal to hit Mitsui in two months. In July, prosecutors indicted Mitsui employees for another bid rigging scandal. That one involved a power plant on one of four Russian-held islands claimed by Japan.

The scandals have eroded investor confidence and taken a heavy toll on Mitsui's share price.

KDDI, Japan's second-largest telecommunications company, will soon launch a new mobile phone service. Handsets will be equipped with built-in cameras, allowing users to send and receive video e-mails.

J-Phone, another Japanese wireless company, has a similar service, but the video clips transmitted must be five seconds or less.

KDDI President Tadashi Onodera says the new phones are packed with more technology. He says other companies do not have this video service and he believes it will lead to greater market share.

After nearly 30 years, Sony will halt production of its Betamax videocassette recorders. The tapes and players were among the first for home use, preceding the better known VHS format, which was originally sold buy Sony rival JVC. But JVC gained huge market share by giving its technology to other manufacturers and Betamax was relegated to a distant second place. Last year, Betamax sales declined to just 2,800 recorders.