Japan faces computer chaos

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JAPAN'S failure to prepare adequately for the millennium bug is posing a threat to the troubled Japanese economy and has grave implications for manufacturing exports around the world.

Leading manufacturers such as Sony and Mitsubishi are likely to have completed their preparations in time, but the problem lies with smaller companies and sub-contractors, which make up 80 per cent of Japan's manufacturing industry.

Legal & General, in common with many other British institutions and banks, said it is concerned. Earlier this year MITI, Japan's trade ministry, estimated that only 30 per cent of the country's medical equipment is Year 2000 compliant while the US system of rating countries for compliance puts Japan on the same footing as Venezuela.

Peter Knapton, L&G's managing director of securities, said: "The bigger companies will probably be okay but the structure of corporates in Japan is such that they rely heavily on a large number of purchases from small sub-contractors. The danger is that the risks... will be felt in manufacturing around the world - a lot of the US computer business draws its component supplies from Japan."