December 22nd, 2008
01:32 PM GMT
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TOKYO, Japan – As Toyota goes, so does Japan's economy. That's just one of the witty sayings you hear tossed around financial circles in Tokyo. That saying held quite a bit more grit than wit as Toyota announced that for the first time in its modern history, the automaker will post an operating loss for the fiscal year. Not just a small loss, but a major one totaling about $1.7 billion; a stunning turnaround for a company that one year ago posted record profits. In the words of Credit Suisse auto analyst Koji Endo, this is "the worst ever."

He didn't just mean for Toyota, but for the market overall. Toyota is Japan's winner, the one that always sets the standards and breaks the record books, the one company that others measure themselves against. So if Toyota is struggling, smaller and weaker companies around the world are faring even worse.

And as the largest automaker in Japan, Toyota's balance sheets tell the story of Japan's export-driven economy. Japan's government announced a trade deficit for the second month in a row. Global exports dropped by 26 percent and US exports plunged 33 percent. The domestic economy can't recover without global demand increasing, agree analysts.

So yes, the news is history-making and head-turning from Toyota. But it also paints a gloomy picture of how deep Japan's recession will be and how tough it will be to recover.

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