Japanese giants back recovery

JAPAN'S big corporations will support the government's economic reform programme despite the pain it is causing them, one of the country's most powerful industrialists said.

Takashi Imai, head of Nippon Steel and chairman of the Japan Federation of Economic Organisations, said drastic surgery was needed to rescue the faltering economy, but that Prime Minister Junichiro Koizumi's policies would eventually achieve their aim.

Despite Imai's optimism - some would say complacency - the picture could hardly be gloomier. As industrial production declines, unemployment is at a record high of 5.3%, dashing hopes of an upturn in consumer spending. There are also signs of disagreement within the Koizumi cabinet, with ministers apparently at odds over public spending plans.

Meanwhile, concern is growing over the loss of manufacturing jobs to South East Asia and China. Hi-tech giants including Toshiba and NEC have increased production in Asian countries where wages are lower in a bid to cut costs amid a global electronics slump that has worsened since the 11 September terrorist attacks on the US.

Imai, speaking at the Foreign Correspondents' Club in Tokyo, said it was essential to keep the reform programme on course, with faster progress needed on tackling non-performing loans.

Some analysts estimate that about 170 trillion yen of loans are to companies that are at risk of bankruptcy, equivalent to roughly one third of Japan's annual economic output.

Imai said Japanese technological expertise, particularly in IT, life sciences and biotechnology, could aid economic recovery, though he admitted that US superiority in these areas was 'overwhelming'. Asked about a proposed free trade agreement between China and the Association of South East Asian Nations, Imai said Japanese industry did not consider it a threat for at least 10 years.

With China's market of about 1.3bn people and Asean's 500m, the planned free trade zone would be the largest in the world.