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The government’s economic report for December states that Japanese economic conditions are “worsening,” a downgrade from the previous month’s assessment that “the economy has weakened further.” The term “worsening” was used for the first since February 2002, after the information-technology bubble had burst.

The report comes as official recognition of the increasingly gloomy economic prospects. No wonder a comment by economic and fiscal policy minister Kaoru Yosano is not encouraging. He said, “The worsening of the Japanese economy will continue for the time being and there is the possibility that production cuts and employment adjustments will spread.”

The report also has reduced ratings for corporate profits, capital spending and housing starts. It represents the lowering of the assessment of the economy for the third straight month.

The Finance Ministry’s report on exports is also gloomy. Japan’s exports in November declined by 26.7 percent from a year earlier to ¥5.326 trillion — the biggest year-on-year decrease since 1980, when the current statistical method was first used. Japan also suffered a trade deficit for two straight months.

The bellwether auto industry is facing a difficult time. The Japan Automobile Manufacturers Association forecasts that domestic new vehicle sales in 2009 are likely to fall below 5 million units for the first time since 1978. Toyota Motor Corp. expects a ¥150 billion group operating loss for fiscal 2008 — following eight consecutive years of increasing profits — due to shrinkage of global car sales and the steep appreciation of the yen.

While the government’s economic report said consumer spending was “mostly leveling off,” it expressed fear that rapid production cuts will lead to a large loss of jobs. It said the employment situation for December was “rapidly worsening,” compared to “worsening” in November. Wage cuts and unemployment will depress consumer spending, which will lead to further reduction of production and employment. To prevent the economy from sinking deeper, the government must employ every possible countermeasure, as Mr. Yosano said.

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