Japan Inc troubles mirror nation’s economic malaise

JAPAN Airlines staff guide travellers at Tokyo’s
 Haneda airport yesterday. Japan’s corporate titans
once seemed unstoppable are in trouble, adding to
 the nation’s long economic malaise. — AFP

TOKYO — Japan’s corporate titans once seemed unstoppable, but now Toyota is in crisis, Japan Airlines is bankrupt and a host of other companies are in trouble, adding to the nation’s long economic malaise. Its top two automakers, Toyota and Honda, are both reeling from massive safety recalls and another Japanese manufacturer has admitted to faking safety data for 150,000 aircraft seats.

The myriad problems have prompted observers to question just what happened to Japan’s technological prowess. Japan’s economic juggernaut began sputtering long ago and is widely expected soon to be overtaken by China, but until recently at least the Japanese could still take pride in the worldwide success of their major companies.

“For many Japanese, JAL going bankrupt was already unimaginable. Now Toyota comes as a second shock,” said Tatsuya Mizuno, an analyst at Mizuno Credit Advisory. Japan Airlines last month filed for bankruptcy with $26 billion of debt in what is one of Japan’s biggest-ever corporate failures.

Hobbled by years of poor management and heavy costs stretching back to its days as a state-owned flag carrier, it is now undergoing radical restructuring, slashing more than 15,000 jobs and axing loss-making routes. Toyota is recalling more than eight million vehicles around the world owing to an array of safety problems with accelerator and brake systems that have severely tarnished its once-impeccable reputation.

“Japan equals technological excellence, and Toyota was seen as being at top of that technological mountain,” said Noriko Hama, an economist and professor at Doshisha Business School in Kyoto.“The Japanese economy’s image is bound to suffer quite significantly as a result” of the auto giant’s woes, she warned.

Japan’s corporate troubles come as the deflation-ridden economy looks set to be unseated by China as the world’s number two economy, a position it has held since the late 1960s. “They are all a symptom of a system which is a victim of its own past successes,” Hama said. Japan developed its own ways of doing things during its post-war economic boom and was unprepared for the “global jungle”, she said.

The nation enjoyed an era of extraordinary opulence during the 1980s, with a booming stock market, soaring property prices and low interest rates which fuelled a corporate shopping spree abroad. But the bubble burst at the end of 1989 and the stock market is still only worth about a quarter of its all-time peak, with the nation facing an ageing population and the prospect of a declining domestic consumer market. Japanese Foreign Minister Katsuya Okada said last week that Toyota’s troubles were “a problem for the whole of the Japanese auto industry” and also risked damaging trust in Japanese products.

Toyota is not the only Japanese carmaker hit by safety troubles. Honda on Wednesday recalled more than 400,000 vehicles to fix airbags that it said can explode and spray out potentially deadly metal shards. That move comes on top of a global recall by Honda last month of about 646,000 cars due to a fire risk involving the power-window switches.

Honda has warned the safety problems could put people off buying Japanese vehicles. “We are certainly concerned that the recalls could damage consumer confidence in Japanese cars,” Honda vice-president Koichi Kondo said last week. And in yet another blow to corporate Japan’s reputation for safety, Koito Industries admitted to fabricating safety data for seats in more than 1,000 aircraft used by 32 carriers.
                                                                                                                                                                                                                                        — AFP