Japan in recession
Reuters | 11/18/2008 7:00 AM
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WASHINGTON – Japan became the latest major economy to fall into recession and Citigroup said on Monday it would cut 52,000 jobs, one of history's largest layoffs, stoking fears the global economic slump is worsening.
After a weekend meeting of the Group of 20 advanced and emerging economies failed to come up with specific new 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 already announced and only lags behind 60,000 layoffs by IBM in July 1993 as the largest ever, according to outplacement firm Challenger, Gray & Christmas Inc.
After stock markets closed, the US Treasury said it had completed equity purchases in 21 more banks totaling $33.56 billion, including $6.6 billion in US Bancorp.
In a bid to contain the economic fallout, the US Senate debated a bailout of American car firms, Germany said it was ready to guarantee funds for 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 consumer spending, triggered by a housing crash and worsened by rising unemployment.
Creeping global recession
The United States fell into a recession in April and the downturn is expected to last 14 months with unemployment reaching 7.7 percent this year, according to a survey of private forecasters by the Federal Reserve Bank of Philadelphia.
That would be the longest contraction since the 16-month recession that ended in 1982, according to the National Bureau of Economic Research. The organization has not declared a recession this year, in part because output expanded in the second quarter, fueled by economic stimulus plan payments.
A top Senate aide said another stimulus plan was not likely to be approved during Congress' post-election session this week, the last time lawmakers are to meet in 2008.
Britain's main employers group forecast that joblessness could rise to almost 9 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 already in recession, usually defined as an economy shrinking for two consecutive quarters.
Japan surprised markets with data showing the world's second-biggest economy was in its first recession in seven years as the worst global financial crisis since the Great Depression curbed demand for exports. The 0.1 percent contraction in July-September was worse than forecast.
"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 was rising, 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.
Market woes and car trouble
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 responses to their own circumstances.
Major US stock indexes all closed down more than 2 percent after steep losses on Friday, after stocks in European and Asia also ended lower.
Oil slipped almost 3.5 percent as concerns about demand offset evidence of OPEC output cuts and the hijacking of a Saudi Arabian supertanker. Economic concerns supported safe-haven demand for government bonds, on both sides of the Atlantic.
"The economic outlook is worrying and no solution has been found short term," said Simon Wardell, analyst at economic consultants Global Insight.
The G20 statement vowed tougher accounting rules, a review of compensation and greater cooperation between national regulators. It told finance ministers to develop specific plans, with the first actions completed by the end of March and a follow-up meeting held by the end of April.
With a $700 billion fund promised to stabilize the battered US financial system, the US Senate debated emergency legislation to provide $25 billion of that aid as a loan to the nation's "Big Three" automakers, General Motors Corp, Ford Motor Co and Chrysler LLC.
The German government said it was ready to guarantee funds for ailing carmaker Opel, the first European carmaker to turn to a government for help, but any money it provides to the GM unit must stay in Germany.
Fitch Ratings put Japanese car giant Toyota Motor Co on a negative ratings watch because of the global downturn, stronger yen and challenges in the auto industry. Toyota is one of the rare companies to have a top-notch "AAA" rating.
