Japan on the brink, Sony chief warns

Fears of global collapse overshadow meeting of world leaders

THE SPECTRE of a global recession, triggered by a collapse of the Japanese economy, emerged yesterday, spreading jitters through the financial markets and overshadowing a high-level meeting of the world's leaders today.

A chilling warning by the head of Sony, one of the world's largest corporations, that his country's economy was on the verge of disintegrating, came on the heels of a sequence of dismal economic news from Tokyo.

Norio Ohga, Sony president, said: "The Japanese economy is on the verge of collapsing ... If the economic situation continues to decline, we will face a long spiral of deflation. This will no doubt have a damaging effect on the world economy."

Although his words were addressed to foreign reporters - and therefore to the wider world - the message compounded a bad day for the stock and currency markets in Japan.

In a bitter personal attack, Mr Ohga compared Ryutaro Hashimoto, the Japanese Prime Minister, to Herbert Hoover, the American President who led the country into the Great Depression in 1929.

Mr Ohga's remarks, the strongest public criticism by a senior businessman of Mr Hashimoto's handling of the economy, came at the end of a grim day in Tokyo in which bad news from the business sector caused a further dive on the stock exchange. Economists also confirmed Japan was in recession.

The Nikkei share average experienced its biggest one-day fall of the year, closing at 15,702.9, a plunge of 538.76 points or more than 3 per cent. The drop followed the publication by the Bank of Japan of its quarterly survey of business confidence which revealed that morale is even lower than expected.

The Bank of Japan's "diffusion index", the difference between major manufacturers reporting favourable conditions and those experiencing hardship, was minus 31, compared to minus 11 three months ago.

"A broad-based recession is thus confirmed," said Jesper Koll, JP Morgan's chief economist in Tokyo. "Now a complete downward spiral adjustment is in evidence - corporations are adjusting down sharply their targets ... it will take at least one full year to reverse."

Mr Ohga's attack came as Mr Hashimoto was about to land in London for two days of talks with heads of government for the Asia Europe Business Forum. He has come under intense criticism from Europe and especially from the US for doing too little to stimulate domestic demand. Last week, the Japanese government announced a 16 trillion yen package of public spending while Wednesday saw the launch of the so-called "Big Bang", an ongoing programme of financial reform and liberalisation.

The "Big Bang" is intended to increase the efficiency of Japanese finance companies by forcing them to compete with foreign and domestic competitors - but before that happens, a number of weak firms are likely to go out of business.

The economic package disappointed businessmen like Mr Ohga because it contained no specifics of how the money will be spent. "The plan seems to call for more investment in the public sector," he said last night.

"However, I believe what we need now more than ever is to stimulate consumer demand." Neither measure succeeded in halting the recent downward trend of the markets.

Hopes of an export-led recovery are slim for two reasons: the Asian economic crisis has wiped out demand in South-east Asia, previously one of Japan's biggest markets; and the United States is determined not to allow its long-standing trade deficit with Tokyo to grow once again.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test