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 Friday, 20 December, 2002, 15:47 GMT
Tough times for Japan's hi-tech sector
Visitor at the Sony Corporation showroom in Tokyo

Inventions like the Sony Walkman and the transistor radio once powered Japan's development as a world economic power but 2002 has been a terrible year for Japan's high tech firms.

Famous names like Hitachi, NEC and Fujitsu have lost vast sums of money and shed thousands of jobs.

But that doesn't seem to have shaken Japanese faith in technology.

And there are still success stories despite problems in the huge American market.

Mixed fortunes

America is Japan's biggest overseas market.

Exports to the States were 2% higher this October compared to the year before but it is a mixed picture

Digital camera
Japanese digital cameras are a huge hit

The latest hit in Tokyo's amusement arcades is a drumming machine.

Players bang the drums according to musical instructions given on the screen.

The toy's maker, Konami, is on course for $2bn worth of software sales this year - up 9% compared to 2001 - thanks to several successful games in America.

Sales of certain Japanese computer games, cars and office equipment to the US may be rising but Mike Shibata, chairman and chief executive of ceramics company NGK, said his firm is having trouble in the United States.

NGK exports a significant number of products to the US, particularly specialist ceramics.

Mr Shibata said a slowdown in the communication and chip industries in the United States has effected his export business.

Vicious circle

Businesses around the world have been affected by the slowdown in the US economy.

And Japan's currency - the yen - has risen 5% against the US dollar since of the start of 2002, making Japanese goods seem expensive to American customers.

There are also problems at home.

Consumer sales in Japan have fallen every month this year, largely as a result of deflation.

There are plenty of people browsing the shelves but shoppers are unwilling to spend, knowing goods will probably keep getting cheaper.

It is a vicious circle; as sales fall, companies cut their prices.

This affects their profits which in turn leads them to cut staff.

Those staff cuts have pushed unemployment in Japan up to its highest level since the end of the Second World War, and worries about job losses put people off spending so once again tempting companies to cut their prices - and so it goes on.

New inventions

But Japan is still producing plenty of success stories.

An estimated 24 million digital cameras will be sold worldwide this year - up nearly a third on last year - and 90% are manufactured by Japanese companies.

One of the firms cashing in is NEC and its chairman Hajime Sasaki thinks there are two reasons the Japanese dominate the market for such products.

"Japanese people have a higher level of education according to our schools system," he said.

"The second reason is Japanese people like to handle small products and material so it is very good to produce this kind of smart product.

"Maybe this is the background why the Japanese people are so successful when introducing new technology."

So the challenge for Japan is to keep up the flow of tiny technological masterpieces which the world wants to buy - with each new invention hitting the marketplace before the last goes out of fashion.

Japan's long road back to prosperity depends on the trend continuing.

  The BBC's Duncan Bartlett
"America is Japan's biggest overseas market."
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