Hiroshi Morita says business is better than it has been for 10 years -- but in Japan, that's not saying much. In the office above his factory in Ota City, on the outskirts of Tokyo, where the thump of huge metal-stamping machines reverberates through the floor, he says orders have finally picked up, and he has managed to avoid cutting the wages of his 37 staff.
His company, Morino Indus-tries, makes metal frames -- these days for flat-screen TVs -- and his customers are the giants of Japan-ese electronics.
Morita's story, of laying off workers, cutting the wages of those who remained, and still fighting to find a competitive edge, has been repeated all over Japan since the frenzy of the 1980s boom years gave way to a 10-year slump. It has become known as Japan's lost decade: while China and other developing countries were surging forward, Japan stood still. Growth for the 10 years from 1992 averaged barely 1 percent, as prices and wages spiralled downwards.
Now, just as a new optimism about the future has begun to creep into homes and businesses, the dollar selling spree, which has shaken financial markets since US President George W. Bush's re-election, is threatening to derail Japan's best hope of a genuine recovery for many years.
Over the last two months, the yen has appreciated by more than 9 percent against the dollar; and since China pegs its currency, the yuan, to the greenback, Japan's exports are becoming more expensive in its two major markets.
Prime Minister Junichiro Koizumi made his feelings clear at a press conference last week: "I don't welcome a rapid fall in the dollar and I don't think it is desirable."
Inside the Ministry of Finance, the anxiety -- and the irritation -- about America's apparent willingness to sit back and watch the dollar tumble is obvious. A senior official criticizes Federal Reserve chairman Alan Greenspan's "misjudgment," in standing up on Nov. 19 when the sell-off was already well underway and declaring that the vast US current account deficit, the main catalyst for the dollar's decline, was becoming "increasingly untenable."
"Such remarks are not welcomed by other countries," the Ministry of Finance official said.
Japan has made clear its desire for a campaign of joint intervention with the European Central Bank to prop up the greenback. In the spring, the ministry spent billions of dollars capping an earlier surge in the yen; but it hasn't intervened since March.
Its less activist approach this time probably reflects the mood of cautious optimism among analysts and executives about Japan's ability to withstand a yen appreciation.
"Japan is our home market, and we expect much growth in the Japanese market," says Katsuhiko Machida, president of Sharp, who spells out the firm's strategy of developing "one-of-a-kind" products to compete with lower-cost econo-mies such as China.
A display of sleek flat-screen LCD TVs shows where the firm thinks the future lies, and Machida says Sharp's "black box" manufacturing process is aimed at safeguarding the secrets of its technology. This constant effort to secure competitiveness by finding a new technological niche has been characteristic of the radical restructuring many firms have undertaken since the long downturn began.
Graham Turner, of GFC Econo-mics, points to Organization of Economic Cooperation and Development data showing that Japan was the only G7 country to increase its share of global exports over the last three years.