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Toyota City: How it became Japan's Detroit....when toyota city sneezes, japan gets a cold..... Posted by Vishva News Reporter on July 19, 2009 |
A
SHORT PRIMER ON JAPANESE ECONOMY....
.....THE SECOND LARGEST ECONOMY IN THE
WORLD....
DURING THE 2008-09 WORLD ECONOMIC
AND FINANCIAL CRISIS
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The island nation of Japan finds itself in the grip of its worst
economic downturn on record. In a country only recently recovered from
its “lost decade” of the 1990s, the prospect of another prolonged and
painful economic downturn is a dismal one. Japan is expected to be
slower pulling out of its recession than other advanced economies. The
slump has devastated Japan's export sectors, driven by powerhouses such
as Toyota and its rival auto makers, and the electronics giants like
Sony.
Exports account for just 15 per cent of Japan's economic output, but the
work is high-value, and ripples through the economy. Domestic demand,
which fuels a huge service sector, is also hurting badly.
Nowhere is the manufacturing slump – and its impact on the wider economy
– more visible and visceral than in Toyota City.
The more fundamental problem is the other 85 per cent – the domestic
economy, specifically the service industry – which is seen as
overprotected, overregulated and badly underdeveloped. Declining
domestic demand has actually played a bigger role in Japan's downturn
than the drop in export sales. Even Toyota loses money – and has for
some time – in the Japanese market.
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ABOUT JAPAN....
- Japan comprises 6,852 islands[6]
making it an
archipelago. The four largest islands are
Honshu,
Hokkaido,
Kyushu
and
Shikoku, together accounting for 97% of Japan's land area.
- Japan has the world's
tenth largest population, with about 128 million people. The
Greater Tokyo Area, which includes
the de facto capital city of
Tokyo and
several surrounding
prefectures, is the
largest metropolitan area in the world, with over 30 million
residents.
- A
major economic power,[7]
Japan has the world's
second largest economy by
nominal GDP and the
third largest in
purchasing power parity.
- Japan has a significant military equipped with modern
defense systems, such as
AEGIS, and boasts a large fleet of
destroyers.
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- It is also the world's
fourth largest exporter and
sixth largest importer.
- It is additionally a member of the
G-8 and is the sole Asian power in that organization.
- It is a
developed country with high
living standards
(8th highest HDI).
- Japan has the highest life expectancy of any
country in the world and the third lowest
infant mortality rate. (according to both UN and
WHO estimates)......
Please continue to enlighten yourself about Japan including its past
and present by clicking
here |
PVAF is publishing this news story today to show how different is Japan from
USA which is the leading economy in the world...and thus to show....
how being
different but being oneself with determination to prosper through continually
acquiring and using knowledge through education ensures TOMORROW CAN BE HAPPIER THAN TODAY......
Please click on the next line to read the full story of Toyota and Japanese
economy of yesterday, today and tomorrow.....
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Toyota
City: How it became Japan's Detroit
Canadian Globe and Mail:
Saturday, July 18, 2009: Mark MacKinnon
There are many ways to measure how important the car maker Toyota is to
the Japanese economy, and how hard its lost year has hit both the
country as a whole and this once-booming city that bears its name.
You could look at Japan's plummeting export numbers – with automobile
sales leading the way down – and the sagging gross domestic product
figures that have resulted. You could spend an afternoon in the Hello
Work job centre in Toyota City, which once helped recruit workers from
as far away as Brazil for the company's bustling assembly lines but
which is now a quietly desperate place with five applicants for every
available job.
Or you could drop by Machiko Sakakibara's hair salon just a few minutes'
walk from Toyota Motor Corp.'s (TM-N75.30-0.17-0.23%) gleaming corporate
headquarters here. A few years ago, she and her husband's scissors were
flying in an effort to keep up with the steady stream of clients from
both Toyota and its supplier companies who strolled over to keep their
hair short, neat and professional.
But on a recent Friday afternoon, during what should have been her
busiest hours of the week, Ms. Sakakibara stood alone in her gaily
decorated salon with not a customer in sight. Instead of the regular
seven or eight customers a day, she and her husband often now serve just
two or three.
“Because of the recession, people who used to come in every month now
come in only every 50 days. It just means more work for me when they do
come,” the sprightly 65-year-old said with a grandmotherly giggle.
“People have also cut back on eating out, and drinking.”
The pinch is being felt all across Japan, one of the world's richest
countries.
The island nation finds itself in the grip of its worst economic
downturn on record. In releasing another gloomy report this week, the
Bank of Japan tried to put a silver lining on things by highlighting
that the economy – which it forecast would contract by 3.4 per cent in
the year ending next March – had “stopped worsening.”
Talk of a recovery, at Toyota and in the wider Japanese economy, is
usually cast into the future, 2010 at the earliest. Some expect that it
will take far longer.
In a country only recently recovered from its “lost decade” of the
1990s, the prospect of another prolonged and painful economic downturn
is a dismal one. Japan is expected to be slower pulling out of its
recession than other advanced economies. The slump has devastated
Japan's export sectors, driven by powerhouses such as Toyota and its
rival auto makers, and the electronics giants like Sony.
Exports account for just 15 per cent of Japan's economic output, but the
work is high-value, and ripples through the economy. Domestic demand,
which fuels a huge service sector, is also hurting badly.
Nowhere is the manufacturing slump – and its impact on the wider economy
– more visible and visceral than in Toyota City.
Toyota directly accounts for billions of dollars in annual sales and
tens of thousands of Japanese jobs. If you include the hundreds of
companies across the country that supply it – 400 of them in the Toyota
City region alone – the company's importance multiplies.
Even General Motors doesn't mean as much to the U.S. economy as Toyota
does to Japan's. Sales at department stores in the nearby city of Nagoya
have fallen almost in lockstep with Toyota's fortunes.
In Toyota City, 80 per cent of the 410,000 residents owe their
livelihoods to Toyota. By the start of this year, as the number of job
seekers here leapt 130 per cent from January, 2008, the city had won
unwanted fame as Japan's most out-of-work town.
The Sakakibaras' hair salon is still doing better business than many in
Toyota City. Across the street from their still-swirling barber pole, a
row of grey metal shutters covers what used to be a thriving little
commercial district consisting of a convenience store, vegetable market
and small clothing retailer.
“If Toyota catches a cold, everybody gets pneumonia,” Ms. Sakakibara
explained.
Suddenly, this city that once aspired to be the next Detroit is worried
that it will become exactly that.
Political paralysis
Toyota's pain is felt far beyond Toyota City.
The credit crisis in the faraway United States all but wiped out a key
market for Toyota's cars. The world's largest automobile company was
forced to cut production, reduce shifts and let 9,000 temporary workers
go as their contracts expired.
It was a downsizing felt right across a nation.
“The auto industry's weight in our economy is four times more than in
the case of the U.S. While U.S. auto makers have outsourced very much,
Japan's auto makers have kept a pyramid of [domestic] contractors,” said
Akira Kojima, a senior fellow at the Japan Centre for Economic Research.
“The short-term impact [of the downturn] is very, very significant.”
Toyota and the other giants of the Japanese automobile industry have led
the way down as Japan has slid deep into recession over the past 12
months. Honda Motor Co. Ltd. and Nissan Motor Co. Ltd. are also mired in
deep slumps as exports of Japanese cars to the U.S. continue to plummet,
falling 54.8 per cent from May, 2008.
Over all, Japan's economy shrank by a record 3.8 per cent in the first
quarter of 2009 compared with the previous quarter, or a staggering 14.2
per cent year over year. Unemployment, meanwhile, rose to a
five-year-high of 5.2 per cent, a number kept artificially low by the
hundreds of thousands of Japanese who have simply given up looking for
work.
The bad news keeps piling on. Every week seems to bring a new raft of
ominous reports and statistics detailing the depths of the country's
worst recession since 1945.
This week, the International Monetary Fund forecast that Japan's gross
domestic product would shrink by a record 6.0 per cent this year and
said that deflation – now at 1.1 per cent – would linger through 2011.
To put that in perspective, anything in the range of a 6.0-per-cent
contraction would wipe out all the growth of the past five years. Put
another way, it would be roughly equivalent to a third of Canada's gross
national product disappearing.
The IMF said that the outlook for Japan's export-dependent economy
remained “exceptionally uncertain” and said the government of Prime
Minister Taro Aso should prepare to expand on the $260-billion (U.S.)
stimulus package it has already rolled out.
“In terms of the economic cycle, we're still on the downtrend. We hit
the big bottom, but the bottom is unprecedented. There has been some
recovery, but we're still below the surface of the seawater, so it's
still difficult to breathe,” said Mr. Kojima of the Japan Centre for
Economic Research.
“The [full] recovery will not come quickly. It's not a U-shape recovery.
There may be a second dip.”
Optimism is indeed sparse here, even among politicians gearing up for a
general election now just weeks away.
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“It seems that in 2010 as the U.S. economy recovers, so too will the
global economy recover,” Foreign Minister Hirofumi Nakasone said in an
interview with The Globe and Mail at his Tokyo office. “However, unlike
recovery from former global recessions, there is a possibility that the
United States may not be the driving force for the recovery and the
speed of recovery will be moderate all over the world.”
But while Mr. Aso's government did manage to pass the stimulus package
in April, his cabinet's deep unpopularity has left the country all but
leaderless during the year-long economic crisis as calls for more
government intervention have mounted. This week, Mr. Aso accepted the
inevitable and called a general election for Aug. 30, 2009 in which his
ruling Liberal Democratic Party is expected to fare abysmally. If the
LDP loses, it will end its nearly five-decade grip on power.
Ken Courtis, the Tokyo-based former vice-chairman of Goldman Sachs, said
the political paralysis has prevented Japan from making the dramatic
overhaul of its still export-oriented economy that it direly needs. The
country, he said, needs to undertake massive privatization and
deregulation schemes that can stimulate its moribund domestic economy in
order to make up for the collapse in exports.
“Japan is in a profound crisis. It's a crisis for which the Japanese
require strong political leadership to make big decisions on political
reforms,” Mr. Courtis said.
While many economists argue that Japan was hit so hard by the global
economic crisis because of its reliance on exports, overseas sales
actually make up a far smaller share of Japan's economy than in
neighbours like China, South Korea and Taiwan.
Exports, predominantly automobiles and consumer electronics, account for
only 15 per cent of Japan's GDP, compared with 33 per cent in China, 40
per cent in South Korea and 65 per cent in Taiwan. The export-oriented
sectors of Japan's economy, while hurting badly at the moment, are
considered globally competitive and are expected to bounce back when
global trade does.
The more fundamental problem is the other 85 per cent – the domestic
economy, specifically the service industry – which is seen as
overprotected, overregulated and badly underdeveloped. Declining
domestic demand has actually played a bigger role in Japan's downturn
than the drop in export sales. Even Toyota loses money – and has for
some time – in the Japanese market.
Few, however, expect that a victory by the opposition Democratic Party
of Japan – seen as replacing one group of political elite with another –
will lead to the desperately needed overhaul. “A DPJ government will not
change Japan's macro fundamentals in the short run,” reads a report
released this month by the Tokyo office of Morgan Stanley. “Growth will
still stagnate, deflation continue and deficits rise.”
All eyes
on Toyoda
Beyond the economic pain and political wrangling, there's a real feeling
of shock here. After decades of steady profits, no one seemed to believe
that things could ever turn this bad for the country – particularly for
Toyota and Toyota City.
All eyes are now on the company's newly appointed president, Akio
Toyoda. Mr. Toyoda, the 53-year-old grandson of founder Sakichi Toyoda,
replaced Katsuake Watanabe shortly after the ink started flowing red on
the company's balance sheets.
The company's $4.4-billion (U.S.) loss for the fiscal year that ended
March 31 was its worst ever, and despite slashing production from 7.5
million vehicles to 6.5 million, the company is forecasting an even
bigger deficit this year.
In his first press conference since taking the job, Mr. Toyoda painted
the company as having overextended itself in an effort to make big cars
and big profits in the American market. He promised to take a
30-per-cent pay cut himself, and offered a back-to-basics strategy that
would see the company develop new and separate strategies for each of
the regions it is targeting: North America, Europe and Japan, as well as
emerging markets like China and India.
Instead of offering a full range of Toyota products in each market, the
company will aim to sell American-style cars in the U.S., Japanese cars
to the Japanese and in all regions return to promoting the cheap,
reliable cars through which the company made its name.
And there is already a silver lining to all the dark news. The latest
model of the hybrid electric Prius model is selling so fast – sales in
June jumped 258 per cent from the previous year – that the company
announced last month it would boost production at the two plants near
Nagoya where the car is built.
Nonetheless, Mr. Toyoda was only optimistic in the longer term: “It will
be sailing amid troubled waters for me and the new management team,” he
told the press conference. “The tough conditions may continue for two
years.”
Poised
for reinvention
The good news about the Prius has become legend in this land, and
repeated as gospel prophesying better times by everyone from economists
in Tokyo to city hall staff and unemployed workers here in Toyota City.
The company will bounce back, everyone whispers to each other.
A tidy city where nearly every business – even those that have nothing
to do with the automobile industry – has the word “Toyota” in its name,
Toyota City's fastidious exterior could change rapidly if the company's
fortunes don't recover. Corporate income tax collection was off by more
than 96 per cent last year as not just Toyota but all the business
reliant on it posted untaxable losses. As a result, the construction of
a new municipal building was put on indefinite hold. So too was all
scheduled maintenance work on the city's roads, parks and other
property. “This is the first time we have ever experienced this as a
community,” said Toru Niimi, an official in the international relations
department of city hall.
Born here 37 years ago, Mr. Niimi said there had been an understanding
among residents that times might not always be so good for Toyota, but
that after 45 consecutive years of profits, people were still stunned by
the downturn. “For it to hit so drastically and deeply this year and
last, that's what people didn't expect.”
At the Hello Work employment centre, manager Masami Kawajiri is doubling
these days as a receptionist in order to keep up with the surge in job
seekers. Most are young and middle-aged workers who came to Toyota City
to take up temporary jobs that disappeared when the company slashed its
work force.
Many are Japanese who moved to Toyota City years ago when the good times
looked like they'd continue indefinitely. Thousands are Brazilians of
Japanese descent who came here under a special program to fill a labour
shortage in the booming 1990s.
For now, many remain in the city, straining its declining resources.
Many say they're hoping for jobs on the Prius assembly line when it
inevitably expands to keep up with booming demand.
“In the past, there have been up and down times, but you could always
see what's ahead. This time, no one knows what's happening,” Mr.
Kawajiri said during a short break from answering phones and dealing
with the steady stream of walk-ins at Hello Work.
Toyota and Japan have been here before. As war broke out in East Asia in
the late 1930s Toyota transformed itself from the Toyoda Automatic Loom
Works, and the production of weaving machines, into an auto maker to
help fill the country's wartime needs. In the aftermath of the Second
World War, Japan as a whole reinvented itself as a global manufacturing
and research and development hub.
Toyota hopes the Prius will be the beginning of its next reinvention.
The hybrid carries not only the hopes of Toyota and the city around it,
but those of the wider Japanese economy as well.
“We can say that if Toyota fails, then the Japanese economy will surely
fail,” automobile industry analyst Masaaki Sato said recently. “If
Toyota can properly do its job, then the economy can recover.” |
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