Friday, 24 November, 2000, 15:51 GMT Japan supermarket in crisis

Japanese shoppers have been reluctant to part with their cash

One of Japan's largest retailers is on the brink of bankruptcy and seeking help from the banks who have lent it money. Supermarket group Daiei hopes to seal a $5.62bn rescue package from Sanwa Bank, Sumitomo Bank, Tokai Bank and Fuji Bank.

The company also plans to close 32 stores and cut 4,000 employees from its staff of 43,000, as part of its three-year 'Phoenix' restructuring plan.

Daiei is the latest Japanese corporate to be hit by the ongoing recession, with consumers still reluctant to spend their money on the high street.

News of Daiei's troubles renewed fears that Japan's economic recovery has yet to gain momentum.

Last week Japan's Economic Planning Agency said that the country might slide back into recession in the next two quarters.

Yen troubles

The yen slid on Friday, hitting nine-month lows against the dollar - and the Nikkei index of leading shares fell to a 20 month low.

"Fears of more corporate collapses are clouding Japan's economic outlook into next year and this is weighing on the yen," Derek Halpenny, currency economist at Bank of Tokyo-Mitsubishi in London, said.

But Daiei remains optimistic that it can turn its business around.

"We aim to put a greater emphasis on a recovery in our mainline retail business," Kunio Takagi, Daiei's incoming president said. "This is our last chance to achieve a V-shaped recovery."

The retailer has now cuts its forecasts for profit from $812m to $360m.

Convenient shopping

One of Japan's largest retailers, with about 85 subsidiaries, Daiei is best known for its majority stake in more than 7,200 Lawson convenience stores.

Daiei has been trying to pay down debt accrued during the 1980s.

So far, analysts have welcomed the news.

"This is a big reprieve for Daiei. It alleviates the risk of bankruptcy, at least for now," Toshiko Binder, analyst at HSBC Securities said.

Daiei is not the only retailer to have been hit by the chill winds of Japanese recession.

In July this year, department store group Sogo filed for protection from its creditors in one of Japan's biggest ever corporate failures.

http://news.bbc.co.uk/hi/english/business/newsid_1039000/1039030.stm

-- Martin Thompson (mthom1927@aol.com), November 24, 2000