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Sony cutbacks underscore Japan's economic plight

 Sony cutbacks underscore Japan's economic plight
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Deep cuts announced by Sony are the latest indication that the Japanese economy is in serious trouble.

The electronics giant is to lay off 16,000 people, half of them full time staff and the rest
temporary and contract workers.

It will also cut back on investment and pull out of some businesses to save 850 million euros a year.

The financial crisis has led to a slump in demand for its electronics products.

Sony’s sprawling empire ranges from semiconductors to movies and insurance but it gets 70 percent of its turnover from electronics.

However, it has fallen behind Apple’s iPod in portable music players and is losing money on flat screen televisions.

The strength of the yen against the dollar and euro is hitting Sony’s exports, but domestic demand is also down as Japan’s economy slumps.

It sank deeper into recession in the third quarter than initially estimated.

Compared with the same period in 2007, the world’s second largest economy grew four percent in the early part of the year, but it shrank by 1.8 percent between July and September. That is three times faster than the contraction in the US economy in that time.

Japan’s Prime Minister Taro Aso has called for a new spending package – reportedly perhaps three times as much as already been pumped into the economy to try to resuscitate it.

The meltdown of global financial markets since mid-September has shattered hopes for a short and shallow recession in Japan.