Japan has been forced to allow four large banks and brokerage houses to fail in the past month. Among them was Yamaichi Securities which will be laying off 7,000 workers. This, however, is only the tip of the iceberg. The drying up of cheap credit in the wake of the region's crisis, together with defaults on loans extended in Southeast Asia and a continued drop in stock prices, could cause up to one-third of Japan's financial institutions to fail. Nor is the malaise in Japan's economy limited to its financial sector.
Unemployment is at a post-World War II high.
The nation's Gross Domestic Product, stagnant throughout most of the decade, fell sharply in the second quarter of this year, and industrial production, housing starts, and retail sales all fell in October. Weak demand for its products, both at home and in its Southeast Asian markets, will make it difficult for Japan to rebound without stepping up its exports to the U.S., but U.S. officials, including President Clinton, have sternly warned it not to do so. The crisis shows signs of spreading wider still.