Newsday

Japan Feeling Economic Blues

by YURI KAGEYAMA AP Business Writer

TOKYO (AP) -- Sorting out cardboard boxes and grimy debris at a Tokyo outdoor market, Masao Hidaka came upon a sign that his nation was in serious trouble: Far fewer boxes than usual.

''When there isn't even much garbage, that means our economy is in a sorry state,'' says the 50-year-old fish vendor, who works part-time as a cleanup man. ''Japan is in utter darkness.''

The Tokyo stock market continued its nose-dive Friday, as the benchmark Nikkei Stock Average plunged 3.31 percent to 12,261.80 points -- its lowest close since July 1985, more than 15 years ago. That was worse than the 15-year-low close for the Nikkei on Thursday.

Like many other Japanese these days, Hidaka is worried.

The question on everyone's minds is whether this nation can ever recover from the collapse of the heyday-spending of the 1980s ''bubble'' -- a time when everyone was splurging on designer-brand goods and trendy buildings were going up everywhere.

Things couldn't be more different now.

The government announced on Friday the unemployment rate stayed at a record high 4.9 percent in January. Hiring was expected to fall in coming months because companies were weakening.

The slowdown in the U.S. economy has also added to Japan's woes, hobbling an engine of growth it had previously counted on for driving up exports.

The dismal data Friday, the latest in a spate of bad news, were expected to deal a further blow on the already lackluster consumption here. Spending by wage earners remained flat in January compared to a year earlier, reflecting growing anxiety about the prospects for economic recovery.

''I used to buy a lot of dresses during the bubble days. Now I buy what I need,'' recalls Chiharu Manita, a 35-year-old trucking company worker. ''You never know what's going to happen next, so I save.''

More alarming, the stock prices' downward spiral couldn't be stopped by a surprise interest rate cut by the Bank of Japan Wednesday, signaling easier monetary policy. That was the second rate cut in three weeks.

But what the market had wanted was something more drastic -- a return to the near-zero rate monetary policy that Japan took after the bubble burst and sent stock and real-estate markets crashing.

''It's just like a kid who wanted a 1,000 yen ($10) allowance. If he only gets 800 yen ($8), he's going to want more,'' said Akio Makabe, chief economist at Dai-Ichi Kangyo Research Institute in Tokyo.

Last August, when the Bank of Japan raised interest rates for the first time in a decade, it came under fire from politicians and businessmen.

Makabe said it was only ''a matter of time'' before the Bank of Japan returns to the zero-interest rate policy.

The Japanese government has repeatedly promised to streamline regulations and free up the market to bring about economic change. But progress has been murky, and the leadership appears to be resorting largely to old-style pork-barrel public spending.

Another massive challenge is the problem loans at Japan's major banks totaling nearly $545 billion. The Bank of Japan has been prodding the banks to clean up the problem quickly.

''The outlook for the Japanese economy is severe,'' said Taro Aso, minister for economic and fiscal policy. ''It's just treading water.''

One vow Masaro Sano, 50, a green grocer, has made is to stay away from stocks. Two of his neighboring rival stores went under recently, although his business has managed to stay open.

''They bought stocks. And that finished them,'' he said.

AP-NY-03-02-01 0644EST< 

-- Rachel Gibson (rgibson@hotmail.com), March 02, 2001