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Japan's economic woes
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January 27, 1997: 11:11 a.m. ET
Many Japanese companies have invested overseas, and are struggling
From Correspondent Fred Katayama
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NEW YORK (CNNfn) -- Sony, the king of the Trinitron tube, vowed recently that it would keep a closer watch on its troubled U.S. operations by creating a second headquarters in New York.
Indeed, many Japanese giants that invested heavily overseas in the 1980s are now being hit hard by Japan's economic woes.
Japanese blue-chip stocks have fallen to less than half their all-time highs, and the yen has plunged 50 percent against the U.S. dollar since spring of 1995, hitting the 120-yen level this past Friday.
Economist David Jones of Aubrey G. Lanston anticipates that it will drop even further, noting that the Federal Reserve will likely push interest rates higher, rather than lower, causing the dollar to become even more attractive. (177K WAV) (177K AIFF)
Japan's economy is expected to grow 1 to 2 percent this year.
However, some economists fear that consumers will tighten their wallets even further, because the government insists it must raise the consumption tax from 3 to 5 percent in April. (2.6M QuickTime Movie)
The problem? The government simply doesn't have many fiscal or monetary options to boost growth. The discount is already at rock bottom -- 0.5 percent -- so there's no room for additional cuts.
Furthermore, prime minister Ryutaro Hashimoto is determined to fix Japan's budget deficit by crimping public spending.
Experts say that Japan should put off its consumption tax for now. In the meantime, however, the weak currency might actually provide some relief by fueling exports.
"A weaker yen against the dollar," said international economist Maria Fiorini Ramirez, "is going to be a big plus for the Japanese economy." (93K WAV) (93K AIFF)
One sign that Japan's struggling economy isn't feared here in the U.S. is that the Japan-bashing so commonly heard during the 1980s has faded.
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