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Renewed Concerns About Recession in Japan

Japanese industrial output dropped 1.2 percent in April from the previous month, again raising recession concerns. According to a preliminary government report, the decline is due to a slowdown in the general machinery sector and production of equipment used to make semiconductors. Analysts say Japanese companies are having trouble meeting their production targets because domestic demand remains weak.

Japan's four largest banks reported losses totaling $31 billion for the last fiscal year ending in March. This is 28 percent more than the previous year. The losses are due to declining prices for stocks held by banks and mounting bad loans.

Mizuho, the world's largest bank in terms of assets, announced the worst loss in Japanese corporate history, some $20 billion.

UFJ, the smallest of the four megabanks, reported that it halved its losses from the year before to $5.2 billion. Economics Minister Heizo Takenaka said there is a silver lining in the dark clouds. Mr. Takenaka told reporters that the full-year results show that the financial institutions have made a good start in reducing their non-performing loans.

The losses were within expectations of analysts. They worry, however, that the banks' lower capital reserves will prevent the sector from escaping its mountain of bad debt.

Japan continues to fret about the surging yen, which hurts its exporters. The yen fell late in the week amid concern that more Japanese banks might require government bailouts. The dollar hit its highest level against the yen in nearly four weeks on Thursday.

But currency analysts, such as Peter Morgan of HSBC Securities in Tokyo, warn that the outlook for the U.S. currency is not good. "We're in the situation of a fundamentally weak dollar. This reflects a number of factors but it is primarily a combination of the large current account deficit that the U.S. has coupled with the relatively poor returns that is has on assets currently," he said.

Japan's third largest telecommunication company is reporting a better-than-expected profit of $680 million for the last fiscal year.

This is a sharp turnaround for Japan Telecom from a loss of $560 million the year before. But its stock price fell 12 percent on Wednesday after it also predicted sharply lower profits for the current year due to the cost of building a new network.