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Monday, 15 October, 2001, 06:38 GMT 07:38 UK
Japan's central bank warns on economy
bankrupt store in Yokohama
As the economy weakens, Japanese shops are finding it difficult to find consumers
The Bank of Japan has warned that the country's economy is facing "more severe" adjustments, with the "terrorist attacks in the US... further [heightening] uncertainty".

The central bank's bleak assessment was its fifth downgrading of the country's economic prospects in as many months.

Corporate bankruptcies, meanwhile, are surging, while exports are plummeting according to data published on Monday.

Japan is in a severe recession, with the rate of unemployment at a record 5%.

The bank predicted the "the substantial decline in production" would have "a negative influence on employment and income conditions".

Corporate debt quadruples

As the economy stays mired in the worst of economic nightmares - no or little growth and falling prices - Japanese companies are going bust in ever larger numbers.

According to research firm Teikoku Databank, bankruptcy cases rose 4.4% during September.

Corporate debt surged to 3.13 trillion yen ($26bn), four times the sum recorded a year ago.

The figures were inflated by the collapse of Mycal, one of Japan's largest supermarket chains.

According to Teikoku, these data do not yet take into account any impact of the US attacks.

Trade surplus plummets

Japan's export industry, meanwhile, is finding it more and more difficult to compete.

The country's current account surplus - which measures the flow of goods, services and financial transfers - fell 27.1% compared to September last year.

And compared to August this year, the surplus dropped 37%.

According to the Bank of Japan, "net exports (real exports minus real imports) continue to decline, reflecting not only a slowdown in overseas economies but also sluggish demand for IT-related goods".

But it is not only exporters who are suffering.

Imports are down as well, hit by a weakening yen and slowing domestic demand, according to officials at the finance ministry.

Once the economic slowdown in the United States has spread to Asia, things are likely to get worse, economists predict.

"Production activities in Asia are mainly supported by US demand... I imagine the current account figures in September and October will be impacted by the attacks... in the United States," said Makoto Ishikawa at Japan Research Institute.

See also:

12 Oct 01 | Business
Japan airline tumbles into loss
10 Oct 01 | Business
Japan launches economy drive
01 Oct 01 | Business
Survey raises Japan recession fears
26 Sep 01 | Business
Japan's slowdown to hit Asia
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