Japan Alarmed By Market Drop

After the stock market closed down almost two percent Thursday, Japanese officials admitted the unthinkable: their country has not been this sick in generations.

"The overall economic conditions, are very severe," a top Japan economic policy maker told CBS News Correspondent Barry Petersen.

Japan's gross domestic product (GDP) -- the total output of its economy -- shrank for the fourth consecutive quarter. It was the worst performance in five decades.

It could get worse, says Brian Ross, senior economist in Tokyo for Warburg, Dillon, Reed.

"In Japan, there is at least the risk of depression in the sense of GDP falling 10 percent which is what a lot of people use a definition of depression," Ross says.

Japan is promising billions in new public works projects and tax cuts to prime the economic pump, but that been tried for the last eight years, and failed to revive the economy.

Boeing layoffs are a sign of that failure. That could be just the beginning, economic experts say, because American companies sell billions of other products to Japan from computers to cars.

"If Japan really tanks, if we have minus five percent growth which we have seen in some other Asian countries, it will have a big impact on the U.S. economy -- much bigger than the Asian crisis has had," Ross says.

In a report out this week, the World Bank criticizes the Clinton administration for mishandling the Asian economic crisis. That, coupled with Japan's inability to solve it's economic problems, means a lot of Americans may end up out of work.

Reported By Barry Petersen