New Japan Data Show Recovery Still Far Off

Japan’s troubled economy is continuing its downward spiral with no indication of a rebound in sight, economic data released Friday show.

Industrial output is sliding, department store sales are slumping and unemployment has reached a postwar high, according to government figures for November.

What’s more, a report from financial authorities shows that Japan’s notoriously troubled banks have even more bad loans than previously thought.

Nothing in the latest batch of economic data supports recent predictions by government officials that Japan’s worst postwar recession is nearing an end.

To try to hasten a recovery, Japan’s Cabinet on Friday unveiled a draft budget for 1999 that would double the size of the annual deficit as it launches efforts to kick-start the nation’s moribund economy.

The $706 billion in proposed spending, which requires approval from Parliament, represents a 5.4% increase over this year’s budget.

It features $86 billion in new public-works spending and tax cuts worth more than $78 billion.

“This draft budget for fiscal year 1999 has been made up with priority on promoting economic recovery,” said the Ministry of Finance, which compiled the spending proposal.

The series of dour economic reports began with the release of November job figures early Friday. The Management and Coordination Agency said Japan’s unemployment rate rose to 4.4%, a record high. The jobless figure was the highest since the government started keeping track of unemployment in the 1950s, topping the previous record of 4.3%.

For the first time, unemployment in Japan equaled that of the United States.

Taichi Sakaiya, head of the Economic Planning Agency, said the job situation would probably get worse before it gets better.

“There’s strong pressure for the jobless rate to rise,” said Sakaiya, one of Japan’s top economic planners.

His comments contrasted sharply with his recent upbeat prediction that the economic slump would soon be near its end.

Friday’s data were no better for Japan’s once-mighty manufacturers.

Industrial output at factories and mines in November fell a substantial 2% compared with the previous month, the Ministry of International Trade and Industry said. The fall was considerably larger than forecast by private economists and the government.

While the ministry predicted there would be a 0.3% rebound in production in December, it agreed with other forecasters that a recovery was not yet in sight.

“There still isn’t enough data to indicate that the economy has hit bottom,” the ministry said.

Meanwhile, the trade ministry also reported that sales at major department stores and supermarkets fell 1.5% in November from a year earlier, the seventh straight month of declines.

Economists blame problems at Japan’s banks for the prolonged slump. Many banks are buried under mountains of bad loans left from the collapse of the speculative bubble in land prices in the early 1990s.

While they battle with those debts, banks have cut back on new loans to businesses, contributing to a credit crunch and record rise in bankruptcies.

Another report Friday showed that the problem of bad loans is worse than banks have admitted.

The Financial Supervisory Agency said 17 banks had about $427 billion in shaky loans as of March 31, about 12% more than the banks had disclosed.