A wounded batallion

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So what happened to the promises of the capitalistic Sumos? The Japanese companies were forced to adopt cost-cutting measures and increase efficiency. Auto-majors like Toyota & Honda were also forced to shift focus to developing lighter & economical vehicles. Another trend that was widely visible during this area was the shift away from heavy industries (which had boosted Japanese economy during the boom years) to lighter, higher-yield fields like semiconductors and computer-related technologies & service focused industries. The fall in exports also forced Japanese companies to focus more on domestic market.

Casualties however were not rare as Mitsuru Saito, Chief Economist, Sanwa Bank asserted, “There is no doubt Japan was in the grip of deflation, with household incomes falling, unemployment climbing, and wholesale price index and the consumer price index declining.” Right as he was, unemployment levels rose from the pre-1990s level of 2% to more than 5.5% post-1994. This fall in employment and salary standards also reduced consumer spending and for the first time post-Allies’ attack, Japan witnessed a ‘negative’ GDP growth of 1.5% in 1998! The effects of the depression had started showing on national output as well. Worse, back-calculation showed how this gruesome picture was being painted by the deplorable performance of corporate Japan, as with financial institutions going bankrupt (due to the huge burden of bad debts aggravated by further falling land prices), many companies found living hard.

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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