Japan's financial crisis shows little if any sign of improving, with many of its largest IT companies turning in poor financial results and trust banks warning they expect to move into the red.
Last week, Mitsubishi and Hitachi posted lower than expected six monthly figures, while the week before, Toshiba filed its first losses for 23 years.
Many of Japan?s trust banks, which hold people's pension funds and savings, warned that they could be in the red for as much as two years. But, while there are big problems with the economy, not all are necessarily visible to the naked eye.
According to Yasuo Nishiguchi, a senior executive at Kyocera, many of the issues stem from four or five years ago when the big banks loaned big money to the big conglomerates.
The conglomerates then spent the money on schemes - both at home and abroad - that could never deliver a return on investment.
But, unlike companies in the West, combines like Hitachi, Mitsubishi and Toshiba are unlikely to trim costs by laying off staff and cutting other overheads. Such a move would fly in the face of the "jobs for life" philosophy, which Japanese big business espouses.
This does not bode well for the subsidiaries of Japanese companies overseas and job cuts are more likely abroad before they happen in the domestic market.
Organisations such as Toshiba and Hitachi attribute many of their problems to the slump in the semiconductor market, particular in memory products. They are also afflicted by Japan?s other economic woes as the yen continues to be crucified on the foreign exchange markets.
But they do not share the optimism of the Semiconductor Industries Association (SIA) or market research company, Dataquest, which both predict a recovery in the sector by mid-1999.
Kyocera, a manufacturer of ceramic packaging for the semiconductor industry, has also been hit by worldwide oversupply and the slump in demand. While the $40 billion company has fared better than Toshiba, it turned in a 34 per cent drop in profits for its first fiscal six months.
Hideki Ishida, Kyocera?s chief financial officer, claims that while the firm will be able to recover its position, partly due to a switch in production from ceramic to plastic packaging, the outlook for the semiconductor market is not brilliant.
That, he says, is because Japanese companies expect to see the US economy and some of the major European ones to decline in 1998.
As a result, Kyocera is attempting to re-engineer its business model and concentrate on its mobile business to weather the storms that it believes are buffeting the world economy.
But he does not expect it to be easy. "Our profitability indices are not acceptable because we're going through a pretty heavy transition. Our competition in Japan is feeling the same or even tougher conditions," he explains.
As a result, Kyocera, at best, will be able to reduce its 34 per cent fall in profits for the last six months to 20 per cent for the whole year.
So, to help turn itself around, Ishida says the company is increasing production of MR (magneto-resistive) heads for hard drives and fibre optic products, and shifting the emphasis from domestic to worldwide sales for its mobile telephones.
These handsets are based on the Iridium satellite project Kyocera is jointly undertaking with Motorola. It is also hoping to capitalise on its Daini Denden (DDI) telecommunications business.
But the economic situation will lead Japanese companies to cut their prices, he warns.
"This year we see pretty clear signs of reductions in the market, with people downsizing in terms of price. But corporations will have a hard time because of the quality of their management. They will need the support of their customers,? he explains.
?Big banks used to form industrial groups to support them. These will dissolve and organisations will have to stand on their own two feet. Money should come from investors, especially investors on a global basis," Ishida says.
But there are underlying signs that things will only get worse, not better for Japanese manufacturers.
The big combines are currently supported by thousands of small and medium sized companies that make the tools, design the technology and provide the innovative ideas. These are then exploited by the majors.
But these smaller companies are disappearing fast, unable to survive the existing economic turmoil.
While the Japanese government has attempted to provide a fillip to domestic consumption by providing each citizen with #250 to spend on electronic goods for Christmas, there is little sign that this has boosted consumer demand.
In downtown Tokyo, the 500 metre long Akihabara street is home to over 400 electronics shops, and accounts for annual domestic sales of 350 billion yen. The street, which accounts for six per cent of total domestic turnover, is now virtually deserted.
And things appear unlikely to improve in the short-term. There are only small pay differentials between different jobs in large Japanese companies and many rely on bonuses to boost their income. These can account for as much as a third of overall take-home pay, but are only paid if companies are doing well.
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