Commentary: Storm-tossed Sumo wrestler

The Japanese, in their more self-pitying moments, like to describe their economy as a fragile blossom on the storm-tossed sea of world trade. Japan's rivals may prefer the image of a Sumo wrestler. Japan Inc, a formidable rival, now has formidable problems.

Forget all the conventional wisdom about lifetime employment guarantees. Even the biggest companies have not been able to spare their workforces from job cuts. Japan's number-two car maker, Nissan Motor, announced on Tuesday that it would shed 5,000 employees - almost a tenth of its 53,000 workforce - by March 1996.

The domestic telecom giant Nippon Telegraph and Telephone (NTT) also said it was stepping up its plan to shrink its staff numbers, although it declined to confirm reports by Japanese media that it would slice another 30,000 people from its 230,000-strong payroll by the year ending March 1997.

These measures are an indication of the severity of Japan's worst recession for decades. Japan is an honorary member of the Anglo-Saxon and Scandinavian club of debtors: those economies whose financial market liberalisation provided them with a splendid boom during the Eighties and a correspondingly painful bust in the Nineties. Japan has high debts, falling asset prices, collapsing confidence, sagging consumer spending and a drop in industrial output of 8.5 per cent over the past year.

The big difference is trade. Japan's trading sector is still super-competitive, despite the pain inflicted by the rising yen. With a dollars 133bn balance of payments surplus last year, the government has plenty of room to stimulate domestic spending and ease the workout of high debt. The Prime Minister, Kiichi Miyazawa, one of the most Keynesian of the present crop of international policymakers, will now go ahead with another package of public works and tax incentives for investment.