Sony Chairman Lambastes Japan’s Prime Minister

Amid deepening gloom in corporate Japan, one of the nation’s leading industrialists said Thursday that the economy is near collapse and blasted Prime Minister Ryutaro Hashimoto for policies he said could trigger a global recession.

In a highly unusual attack on Japan’s top leadership by a prominent business executive, Sony Corp. Chairman Norio Ohga said Hashimoto’s tight fiscal policies were reminiscent of mistakes by U.S. President Herbert Hoover that led to the Great Depression of the 1930s.

Ohga’s remarks at a news conference came as exasperation with government policies drove stock prices down steeply and a survey of business leaders showed tumbling confidence in the economy.

Before Ohga spoke, the 225-share Nikkei stock index fell 538.76 points, or 3.3%, to close at 15,702.90, its lowest finish since Jan. 14. At midday today, the market was stable, with the Nikkei off 23.58 points at 15,679.32. Earlier, U.S. ratings agency Moody’s Investors Service lowered its outlook on the country’s sovereign debt rating to negative from stable.

But the dollar continued to soar against the yen, reaching a six-year high of 134.55 yen by midday today, up from 133.50 in New York.

Just days earlier, the stock market had ignored the ruling party’s transparent efforts to drive the index up to 18,000.

As concern spread that a Japanese recession would further pummel the rest of Asia, other regional markets also tumbled. South Korea’s benchmark Kospi index dropped 3.1% Thursday to close at 453.66 points, its lowest since Jan. 10.

At midday today, the Kospi was down 4.5% to 433.30.

In an appearance before foreign reporters, the Sony boss painted a dark picture of Japan’s predicament.

“When we look at what President Hoover was saying in 1929, there are so many similarities with what Prime Minister Hashimoto is saying recently,” Ohga said.

Ohga said that “the Japanese economy is on the verge of collapsing” and that “to make matters worse, there is a general feeling of pessimism throughout the country.”

He urged steps to boost consumer demand, especially by cutting taxes on housing purchases.

Earlier in the day, speaking with Japanese reporters, Ohga described the Japanese economy not as “collapsing” but as “stalling,” which, based on current economic forecasts, seemed a more accurate description of the state of affairs.

Most analysts expect the Japanese economy to show a slight contraction of less than 1% for the fiscal year that ended Tuesday, and either slight growth or a slight contraction for the 1998 fiscal year.

Japan’s economy has stagnated for much of the 1990s, and stocks are down about 60% from their inflated 1989 peak. But if final statistics do show that the economy shrank in fiscal 1997, that would be the first fiscal-year decline in economic output since 1974.

Asked why he described the economy as near collapse when the downturn in output is modest, Ohga said he was trying to influence policy so that Japan would not cause problems for the world economy.

“Should the Japanese economy fall into a negative spiral, that will affect the Asian economies, and should that happen, the U.S. economy will be affected as well,” Ohga said. “I have a grave concern about Japan becoming a trigger for a worldwide recession. That’s why I’m calling on Japanese politicians to do their job seriously.”

Ohga said the basic problem is that even though many businesses are globally oriented, Japanese politicians are domestically focused.

Despite Ohga’s remarks, he and other Sony officials noted that their own firm has been doing well.

Ohga said Sony will “post good figures” for the year just ended, but the new fiscal year “will prove very difficult.” That is partly because Sony “is beginning to feel the impact of the economic crisis in Asia.”