Nokia pull out of Japanese market

Finnish mobile phone giant, Nokia, has said it will stop selling its handsets in Japan after struggling to grow its market share in the country. Nokia said it would continue selling its luxury Vertu brand in Japan, and would dedicate its Japanese business to research purposes. Samsung and LG have also faced problems in Japan - a market dominated by sophisticated domestic phones. Nokia said recently that it would cut costs because of the global downturn. "In the current global economic climate, we have concluded that the continuation of our investment in Japan-specific localised products is no longer sustainable," said Nokia executive vice president Timo Ihamuotila.

Nokia has nearly 40% of the global market for mobile phones, but it reportedly managed to take only 0.3% of Japan's market last year. Foreign companies account for only 5% of the Japanese market, which is dominated by local firms selling phones with features such as TV broadcasting and electronic payment functions. These Japanese manufacturers have only a small presence outside their home market, which also has an advanced third-generation network that makes it difficult for foreign firms to compete. The Nokia-owned luxury brand Vertu was created in 1998 and focuses on one-off specialist phones costing from 3,500 euros to more than 100,000 euros.

Japan joins the recession club

Japan, the world’s second-largest economy, has officially slipped into recession, hurt by weak export growth and steep cuts in corporate spending amid the worsening global slowdown. It is its first recession since 2001 after the GDP shrunk by 0.1% in the third quarter (had previous shrunk by 0.9% in the April to June quarter). Until now, Japan has stood apart from most other developed nations because its banks were relatively unscathed by the financial crisis. But Monday’s data showed that America’s woes reached Japan via its exports, as Americans spend less on Japanese cars, televisions and machine tools. The decline adds to the grim outlook for the global economy, after Hong Kong and the European Union released data on Friday that showed they were in recession. Europe’s largest economy, Germany, also announced last week that it was in recession.

Japan cuts interest rates

Overnight, the Bank of Japan cut interest rates for the first time in seven years. The bank also cut back on Japan's economic outlook, saying strains in global markets are rising and that severe conditions for the world will stay for some time. Rates there are now at 0.3%, down from 0.5%. Japan already had the lowest interest rates in the developed world before the decrease, but despite this many analysts are disappointed the rate was not reduced even more - a fact borne out by the drop in the Nikkei this morning. A soaring Yen along with the slowdown in Europe and the US have put Japanese exporters under severe strain with Sony, Nissan, Toyota and Fujitsu, this week, all reporting miserable profits for the first half of 2008. The Bank of Japan's move followed a rate cut from the U.S. Federal Reserve earlier in the week and will almost certainly precede 0.5% cuts by the European Central Bank and Bank of England next week.