If Toyota fails, its home town also stumbles. Dark signs have been seen in “economic prosperity myth” of Nagoya since Sept.
11, 21. 2008
Toyota Motor Corp. sent a shock wave to the economic world by adjusting its business performance forecast downward by as much as 1 trillion yen. Dark signs reportedly began to be seen in the business condition of the Nagoya city located near the headquarters of the carmaker in around September 2008. The robust activities symbolized by the Aichi Exposition 2005 and the completion of a high-rise building in the town are now things of the past. One wonders if an end has come to the "economic prosperity myth" of the area.
Affected by major damage to auto, machine tool, other export industries
"I feel insidious effect on the economic reality. I think the situation is serious."
This was a comment that came from the person in charge of the public relations of the Nagoya Chamber of Commerce and Industry on Nov. 7, 2008 in response to inquiries made by J-CAST News.
The Chubu International Airport for Nagoya was opened and the Aichi Exposition was conduction in 2005, followed by the opening of the high-rise building in front of the JR Nagoya railway station in 2007. Because of all these, Nagoya was "proud of high economic performance relative to other cities throughout Japan," said the person in charge of public relations. Dark signs have been seen, however, in the economic performance for the past two months or so.
According to the short-term economic forecast, or Tankan, compiled by the Bank of Japan for major companies and manufacturing industries for September, the diffusion index (DI) dropped by 18 points from plus 9 in the previous compiling to the latest minus 9. It was the first time in five years that the index fell to a minus figure. The central bank issued an overall forecast of a minus trend also for October.
The Nagoya Chamber of Commerce and Industry said the active "Nagoya economy" has ended. The Nagoya economy has been supported chiefly by export industries, such as the auto-related and machine tool industries. This was one of the reasons why Nagoya has been strong economically while other towns in the country were adversely affected by persistent decline in consumption in the wake of the crude oil price increases. The economic slowdown in the United States and Europe because of the financial crisis and the continuing rises in the exchange value of the yen, however, dealt a serious blow to the export industries.
Against this backdrop, Toyota Motor revealed on Nov. 6 that the forecast of its consolidated operating profit for the term ending in March 2009 was revised downward from the previous term by 73.6%, and it is becoming clear that the drop in the profit is coming true as forecast. Impact of employment uncertainties is also becoming the source of worry as the company is expected to slice the employment of temporary workers to one third over the period of 12 months starting in March 2008. The chamber of commerce is worried that the unemployment is feared to affect the consumption, indicating that the Nagoya economy has come to a turning point.
Fell down but only to the national level
It does not seem, however, that everything in the town has been badly affected as yet.
The high-rise building, "Midland Square", which opened in front of the Nagoya railway station on March 6, 2007, houses business and commercial facilities. Toyota's offices handling the domestic and overseas business affairs and showroom are also in the building. According to the Nagoya Chamber of Commerce and Industry, the bustle of crowd attracted to the vicinity of the railway station by the opening of the building continued after dark signs were beginning to be seen in September 2008.
According to Towa Real Estate Co., which operates the building, 17 million people visited the building in one year after its opening. The company said the number of the visitors tended to decrease a little after the one-year period. "The decreasing tendency may be due to economic reasons. But it is more likely that the decrease is simply because one year has passed," said a person in charge of public relations at the company. Toyota said that it has neither reduced the staffs of its offices in the building nor made plans to reduce in the future.
The chamber of commerce said that the effective ratio of job offers to job seekers in Nagoya is still among the highest in the country. It said the productions by business firms are still at high levels. The economic condition may have gone down but only to the national level, it said.
As the exports industries are in a pinch, however, the future of the "Nagoya economy" will face a severe challenge unless a measure is taken now. The chamber of commerce says the key is to work out some measures and make efforts to jack up the domestic demand.
"Business firms introduced various types of technology to protect the environment at the Nagoya Exposition. It was even called the 'Environment Exposition'. We think we can create a business chance if we make a good use of such business firms," said the person in charge of public relations.
A request will be made to the central government to build two new runways at the Chubu international airport so that the airport will be operated for 24 hours a day. "If this can be done, exports by airlifting will become active. It is important to think of the future in making investment," the person said.