Japan's economy 'on verge of collapse'

TOKYO -- Japan's economy is near collapse, threatening the health of the world economy, the chairman of consumer electronics giant Sony Corp. said yesterday.

Chairman Norio Ohga spoke to reporters at an annual news conference shortly after the Japanese central bank's latest survey of business sentiment showed confidence had nose-dived since December. Executives worried about both Japan's own sluggish economic growth and the impact of Asia's financial crisis. One economist called the report "catastrophic".

"The Japanese economy is on the verge of collapsing," Ohga said. "If the economic situation continues to decline this will no doubt have a damaging effect on the world economy."

Ohga urged the Japanese government to stimulate consumer demand, and said that simply cutting taxes wouldn't be enough.

"Instead, we need to do away with taxes related to purchasing a home, even if only for the short term," he said.

In the Bank of Japan's quarterly survey, companies also blamed the government for not implementing effective economic stimulus measures. The survey said there were no signs that corporate confidence would recover any time soon.

Ohga warned that the high-flying US economy, where stock prices are near record highs and joblessness is at the lowest level in decades, could take a hit if Japan's economy continues to slump.

"Even the US economy will not be able to maintain its healthy state," he said.

The central bank's "business condition diffusion index" -- which measures the percentage of companies seeing conditions as improving minus the percentage seeing conditions as worsening -- fell to minus 31 from minus 11 in the previous survey on December. 15.

That was much worse than the already dismal minus 24 reading that many analysts had been predicting.

The March figure was the lowest since the minus 39 registered in August 1994, the central bank said.

"I think this is a pretty catastrophic report," said Russell Jones, chief economist at Lehman Brothers Japan Inc. "Japan is sliding deeper into recession."