Japan in recession; Citi lays off 52,000

by Reuters
from Inquirer.net

WASHINGTON — Japan on Monday became the latest major economy to fall into recession, and Citigroup said it would cut 52,000 jobs, one of the largest layoffs in history, adding to worries the global economic slump might deepen.

After a weekend meeting of the world’s 20 largest economies failed to come up with specific new stimulus measures to ease the world’s financial strains, the IMF said it needed at least $100 billion in extra funding to fight the crisis.

Citigroup, the US bank with the farthest global reach, announced the biggest round of job cuts since the financial crisis erupted last year, slashing 15 percent of its workforce in a bid to return to profitability.

The cuts come on top of 23,000 reductions Citigroup had announced earlier and only lags behind 60,000 layoffs by IBM in July 1993 as the largest ever, according to consultant Challenger, Gray & Christmas Inc.

In a bid to contain the economic fallout, the US Senate was to debate a bailout of American car firms, Germany said it was ready to help General Motors Corp.’s Opel unit and Japan’s Toyota came under ratings scrutiny.

Automakers have taken the brunt of the impact from a dramatic decline in US consumer spending, triggered by a housing crash and worsened by rising unemployment.

The United States fell into recession in April and the downturn is expected to last 14 months, the longest since 1982, with unemployment rising to 7.7 percent later this year, according to a survey of private forecasters by the Federal Reserve Bank of Philadelphia survey.

Britain’s main employers group forecast that unemployment could rise to almost nine percent by 2010, and France’s central bank said the French economy should contract 0.5 percent in the fourth quarter.

The euro zone is in formal recession, with two consecutive quarters of contraction.

Japan surprised markets with data showing the world’s second-biggest economy fell into its first recession in seven years as the financial crisis curbed demand for Japanese exports. The 0.1-percent contraction in July-September was worse than consensus forecasts.

“We need to bear in mind that [our] economic conditions could worsen further as the US and European financial crisis deepens, worries of economic downturn heighten and stock and foreign exchange markets make big swings,” Japanese Economy Minister Kaoru Yosano told a news conference.

China’s central bank said the risk of a downturn in its economy were on the rise, and also warned that the global slowdown could hurt its exports

International Monetary Fund Managing Director Dominique Strauss-Kahn told the BBC his organization would likely need at least $100 billion in extra funding over the next six months to help countries survive the downturn.

G20 laundry list

Global markets shuddered under the joint strain of declining economies and ructions in the financial system. US markets were mixed, with major indexes down caught between bargain-hunting after steep losses on Friday and the economic gloom.

Oil dropped on concerns about the strength of demand, before rebounding on evidence of OPEC output cuts and the hijacking of a Saudi Arabian supertanker by Somali pirates.

Markets were unimpressed with the weekend meeting of the G20 in Washington, which agreed on some steps to tackle the world economy but left it to individual governments to tailor their response to their own circumstances.

“The economic outlook is worrying and no solution has been found short term. People are expecting things to get worse as economic data continues to look poor and, in the absence of anything else, that is helping to push prices lower,” said Simon Wardell, analyst at economic consultants Global Insight.

The G20 statement said all financial markets, products and participants would be subject to supervision. It also vowed tougher accounting rules, a review of compensation practices and greater cooperation between national regulators.

Finance ministers were told to develop specific plans, with the first set of actions to be completed by the end of March and a follow-up meeting held by the end of April.

Car trouble

With a $700-billion fund promised to stabilize the battered US financial system, the outgoing Bush administration and its successor were set to tackle the urgent question of how, or whether, to rescue the nation’s “Big Three” automakers.

The Senate was to begin debating emergency legislation to provide $25 billion in aid to General Motors, Ford Motor Co. and Chrysler LLC.

In Europe, the German government has said it is ready to talk with Opel, but would not offer blanket aid to entire industries suffering due to the financial crisis.

Officials from the finance and economy ministries and German states will hold talks on Tuesday to discuss the broader woes in the car industry.

Japanese car giant Toyota Motor Co. was put on a negative ratings watch by Fitch Ratings because of the global downturn and the stronger yen. It cited “unprecedented challenges” in the automotive industry.

Toyota is one of the rare companies to have a top-notch “AAA” rating.