Toshiba joins Japan's jobs slashing

Toshiba will slash its global work by 10 percent through to March 2004

By CNN's Geoff Hiscock and wire reports

TOKYO, Japan -- Japan's largest chipmaker Toshiba Corp has said it will cut its global workforce by 10 percent over the next two and a half years.

In the latest of a slew of Japanese companies to announce massive cutbacks, Toshiba has said it will slash 19,000 jobs from its total workforce of 188,000 by March 2004.

The majority, 17,000, will be lost within Japan as the country seeks to climb out of a decades-long slump.

Another 10,000 workers will be reassigned, says CNN's Rebecca MacKinnon in Tokyo.

Toshiba's move dramatically underscores the "no pain, no gain" mantra of economic reform that Japanese Prime Minister Junichiro Koizumi has pushed since he came to office.

Toshiba sees losses ahead

VIDEO CNN's Rebecca MacKinnon reports on job cuts in Japan's tech industry (August 27) Play video (QuickTime, Real or Windows Media)   AUDIO Toshiba to slash 18,000 jobs worldwide. Rebecca MacKinnon reports. 1.7MB / 2min. 41sec. WAV sound    CNN.com Asia More news from our Asia edition

The widely anticipated announcement came as Toshiba released revised earnings forecasts after the Tokyo stock market closed Monday.

Toshiba said it now expected a group net loss of 115 billion yen ($956 million) for the year to next March. Its shares closed 5.6 percent higher at 604 yen.

With global demand for semiconductor chips tumbling rapidly, Toshiba and its electronics industry counterparts have few options but to restructure.

Already, other Japanese high-technology bellwethers Fujitsu and NRC have announced production cutbacks and more than 20,000 job losses in recent weeks, and Hitachi is tipped to follow Toshiba in the next few days.

Japanese media had reported over the weekend that Toshiba and Hitachi would each cut their workforce by 20,000 employees.

While the job cuts among Japanese technology companies flow from the demand slump, they also point to the economic pain implicit in Prime Minister Junichiro Koizumi's aggressive structural reforms.

Koizumi calls cuts inevitable

Koizumi has warned that that his reform agenda will mean painful decisions and job losses

Koizumi, who has enjoyed record public popularity since he came to office, has made it clear that a rise in unemployment was an inevitable by-product of reform and the Japanese people would have to brace themselves for tough times ahead.

But with Japanese unemployment at a postwar record of 5 percent and the stock market near its lowest levels in 17 years, Koizumi faces a politically dangerous time as he pushes ahead with his reform agenda.

A spokesman for Koizumi said Monday the prime minister thought it was still too early to decide whether to draw up an extra budget to support an economy which by most accounts is already in recession.

Extra budget possible

There has been mounting speculation the government will unveil an extra budget.

That speculation was bolstered when Taku Yamasaki, ranked number two in Japan's ruling Liberal Democratic Party, said on Sunday he aimed to compile a supplementary budget for the current fiscal year with 1.7 trillion yen ($14.15 billion) in spending.

"(The prime minister thinks) it is still a little too early to make a decision on that," deputy press secretary Tsutomu Himeno told reporters when asked about Yamasaki's comments.

Himeno said any decision would take into account factors such as the data for Japan's gross domestic product in the June quarter, due to be released next week.

Himeno said Koizumi had not ruled out the possibility of a supplementary budget but it would have to be consistent with his reform agenda.

A pillar of that agenda is Koizumi's pledge to limit fresh government bond issues to 30 trillion yen from the fiscal year starting next April.

Yamasaki on Sunday called for the limit to be applied to the current fiscal year as well.

Technology hurt

Japan's flat economy is hurting many sectors, but high technology is as the forefront.

Toshiba's 20,000 job cuts reflects a semiconductor market that has softened dramatically as nervous consumers defer spending on high-tech items such as mobile phones, hand-held and laptop computers, and other electronics products.

The Semiconductor Industry Association reported earlier this month that global sales for semiconductors were down 30 percent in June 2001, compared with a year earlier.

The U.S. market was particularly hard-hit, down 45 percent. Sales in Japan fell 20 percent.

The slump is hurting chipmakers throughout Asia, including South Korea's Samsung Electronics (the world No.1 memory chipmaker), and the world's two leading contract chipmakers, Taiwan Semiconductor and United Microelectronics.