Running On Empty

Japan's once thriving automakers now face sagging domestic demand, stagnant overseas markets and inflated costs

Two years ago, Yasuharu Kondo was overwhelmed with customers at his Toyota showroom in Tokyo. Sales were booming, and most shoppers looking for top-of- the-line models, the best their yen could buy. Those days are gone; today Kondo surveys a showroom full of sparkling new cars -- and not a customer in sight. "In my 30 years as a salesman," he says, "I have never seen it as bad as this."

The lament echoes across the $339 billion Japanese auto industry, which finds itself running low on gas. The industry accounts for 10% of Japan's overall economy; thus its falling fortunes...

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