Japan set for job cuts and pain

Hitachi cuts 2001-02 net profit targets

By CNN's Geoff Hiscock and wire reports

TOKYO, Japan -- Japan's largest chipmaker Toshiba Corp is expected to announce massive job cuts when it releases revised earnings forecasts at 4 pm Tokyo time Monday.

The move underlines the "no pain, no gain" mantra of economic reform that Japanese Prime Minister Junichiro Koizumi has pushed since he came to office.

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

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 reported over the weekend that Toshiba would cut 20,000 jobs, or more than 10 percent of its global workforce of 188,000.

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 job cuts inevitable

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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 expected 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.

Reuters contributed to this report.