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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Diamond Jim who wrote (8760)	11/23/1998 12:43:00 AM
From: Jeffrey D	Read Replies (2) \| Respond to of 42834

Japan always seems to find a way to spoil the party. Jeff << Japan recession hits blue chips, more gloom ahead By Miki Shimogori TOKYO, Nov 23 (Reuters) - Japan's once-mighty corporate sector appears to have lost its muscle, with the nation's worst post-war economic slump finally taking its toll on the earnings of blue chip firms like Sony Corp and Toyota Motor Corp. With the strong yen ready to unleash its full effect on earnings of leading manufacturers -- once the cushion for profit declines in other sectors -- analysts warned that they now see no silver lining to the dark clouds over corporate earnings. ''Ongoing corporate restructuring and the favourable effect of economic packages may help mitigate falls in companies' profits next business year, but I believe the profits may not stop declining untill the year's second half,'' said Tomoko Fujii, an economist at Salomon Smith Barney in Tokyo. The economic gloom has sapped the appetite of once free-spending Japanese consumers. What's worse, the nation's bad loan-laden banking sector has caused a liquidity crunch at many firms, helping spur a record level of bankruptcies. Tokyo last week unveiled an economic package totalling nearly 24 trillion yen ($200 billion), the largest ever of its kind. It included measures such as public works spending, tax cuts as well as steps to avert a credit crunch in the corporate sector. But the vaguely-worded package did not lift corporate gloom and the latest downgrade in Japan's credit ratings by Moody's Investors Service -- coming only a day after the package -- was seen likely to further increase corporate fund-raising costs. Reflecting the economic downturn, the electronics sector suffered one of the biggest setbacks of the current earnings season -- September's so-called ''Hitachi shock.'' The electronics giant sent shivers down Tokyo markets with a warning that it would post a group net loss of 250 billion yen this business year to restructure its way out of what the firm called ''our biggest crisis in our history.'' Hitachi set the tone for more downbeat corporate earnings announcements. Industry data showed current profits so far reported by non-financial firms listed on the Tokyo Stock Exchange's first section scored the steepest drop in six years. According to data from Wako Research Institute of Economics, current profits at those listed firms slid 25 percent in the six months to September, while net profits took a dive of 78 percent -- the biggest since Wako started tracking the data in 1963. Wako said the electronics industry alone posted a current profit drop of 33 percent in the interim period. The oil industry hit the steepest current profit drop of 93 percent, followed by 90 percent for non-automotive transport parts makers, it said. Wako said 73 percent of the 782 listed companies surveyed reported falling current profits for the half-year period. ''Manufacturers had long been the only bright spot in the nation's post-bubble economy, but the whole industry is now in deterioration,'' said Hiroki Matsushita, a Wako analyst. Even the bluest of blue chips did not escape unscathed. Sony announced last month its half-year group profits sagged amid price competition and that things would get worse in the second half, predicting it would fall into the red on a parent operating basis for the first time in six years. Last Friday, top carmaker Toyota said its profits slid in the first half of the business year and are forecast to fall further in the full year, as strong U.S. sales are no longer enough to offset the persistent slump at home and in Southeast Asia. The strong yen, which trims dollar-based export incomes for Japanese manufacturers, would take its full effect in the second half, although some analysts still pinned their hopes that recent signs of stability in global chip prices and recovering personal computer sales may ease the pain of electronics manufacturers. Makers of materials such as steel, metal, papers would remain in doldrums, hit by deflationary pressures in Japan and in Asia which drastically slashed their profit margin, analysts said. Sectors that have long been among the ''losers'' group, such as real estate companies and general contractors are also still licking their wounds from the burst of Japan's 1980s ''bubble'' era of sky-high asset and stock prices. Analysts predict the eventual collapse of several general contractors in the months to come, with Japanese banks, another victim of the burst bubble, rushing to recover their loans. Soichi Okuda, a senior economist at Nippon Credit Bank, said that only restructuring efforts hold the key to corporate recovery as the economy -- stimulus package notwithstanding -- will continue to crawl. ''The focus is on each firm's restructuring efforts to improve profitability, which could boost the firm's stock price and help improve corporate confidence as a whole,'' Okuda said. >>