Japan Hit Hard by Global Financial Crisis

Tokyo, Oct. 17 (Jiji Press)--The global financial crisis triggered by the U.S. housing market meltdown has seriously affected the Japanese
economy, causing a number of corporate failures, especially in the real
estate industry, and dampening consumption.
According to credit research agency Teikoku Databank Ltd., the
number of listed firms that went bust since the beginning of this year
stands at 25, nearing the annual record of 29 marked in 2002. Nine of the 25
firms were real estate companies.
New City Residence Investment Corp. <8965>, a real estate
investment trust fund, earlier this month filed for protection from
creditors under the Civil Rehabilitation Law, becoming the first listed
Japanese REIT to go bust.
Explaining the bankruptcy filing, Jun Arai, executive officer of
New City Residence, said the fund-rising environment in Japan had
deteriorated rapidly in the wake of the global financial crisis.
The Japanese REIT market, launched in 2001, had steadily expanded
until last year, but then started to deteriorate as U.S. and European
financial institutions withdrew funds from the real estate sector following
the U.S. subprime mortgage debacle.
To make matters worse, the Sept. 15 collapse of U.S. investment
bank Lehman Brothers prompted Japanese banks to tighten their lending
stances, a senior New City Residence official said.
The stagnation of the Japanese economy led consumers to refrain
from buying expensive items.
"Recently, we don't see young dealers from foreign financial firms
snapping up luxury brand items," said an official of a Tokyo department
store. "This is apparently because their salaries fell steeply."
Consumers are holding back from buying new vehicles, foreseeing a
further slowdown of the economy.
A male worker in his 20s at Saitama Subaru Corp., a dealership for
Fuji Heavy Industries Ltd.'s <7270> Subaru brand vehicles, said drivers are
keeping hold of their vehicles and the replacement cycle is becoming longer
as a result.
Apparel retailer Shimamura Co. <8227>, which has so far fared well
on the back of its discount strategy, is now starting to bear the brunt of
slumping consumption.
The company said earlier this month that its group net profit in
March-August fell 4.2 pct year on year to 8,776 million yen, posting the
first drop ever on a fiscal first-half basis.
Shimamura President Masato Nonaka said that consumers are worried
about their future livelihoods.
A 66-year-old man who runs a construction company in the central
Japan city of Nagano said that people are now always talking about which
firm will collapse next.
In Nagano Prefecture, 52 construction firms went under in the first
nine months of this year.
The Nagano branch of credit research agency Tokyo Shoko Research
Ltd. predicts that the number of failures in the prefecture's construction
industry may top 80 for the first time in five years.
If the Japanese economy gets worse, the economic gap between urban
and local areas will expand further, said Mitsuru Kondo, head of the Japan
Trade Union Federation-Nagano.