Uptick in Japanese investment reverses amid war jitters. (Up Front).

A number of Japanese companies that expanded their presence last year in Southern California are now struggling to compete because of the troubled economy here and abroad. Some are considering reversing their earlier moves.

Last year, an array of firms either leased additional space of more than 20,000 square feet or received building permits for spaces of $1 million or more, according to the Los Angeles Economic Development Corp.

Many of the expansions came from car companies that are holding their own: American Honda Motor Co., Toyota Motor Co., and Autobacs Seven Co., the largest auto-parts retailer in Japan.

But a downturn in the business climate has changed the outlook for other firms in a matter of just a few months, particularly those located in areas near the ports of Los Angeles and Long Beach.

"Business is terrible, it's just very poor right now," said Ralph Conner, an account executive at NNR Aircargo Services (USA) Inc. in Inglewood, a freight-forwarding company and subsidiary of Nishi-Nippon Railroad Co. of Japan.

NNR Aircargo opened a new logistics center in August to accommodate one of its largest customers. But a slowdown in the economy has hit the freight-forwarding business hard, making it tough for the logistics center to become profitable, Connor said.

"Before 9/11 we were having the worst time the industry had ever known," he said. "But the trend continued with the airlines being driven out of business. It's been a rough year."

Waiting to exhale 

Kayoko Macinne, an import-export manager at Mitsui-Soko USA, a warehouse and shipping company at the Port of Los Angeles, agreed that last year's expansions are turning into this year's contractions.

"Slowly, everybody is downsizing," she said. "Our sales volume hasn't changed, but the economic climate has. A lot of goods are coming into our warehouses and being stored simply because people are not buying."

Soichiro Kiyama, president of the Japan Business Association, said membership has fallen dramatically, to just 430 members this year compared with a peak of 750 firms before the bubble economy burst in Japan in 1993.

"There is definitely a lot of retrenching going on' Kiyama said. "I think firms are trying to get by or deciding whether to close down certain operations or combine and merge others. It all goes back to the bad economic situation in Japan, but it is here too."

One of the few success stories among Japanese firms that have expanded is Bandai America Inc., a unit of giant toy maker Bandai Co. Ltd., of Tokyo.

The company launched a new line of toys for girls last year and moved to a massive warehouse in Fontana to support its sales of Hello Kitty and Strawberry Shortcake products, said Roberta Silverman, a company spokeswoman.

Worse in Japan

Brian Swords, an economic affairs advisor to the Japanese Consulate, said many companies are waiting for a turnaround.

"The economy has been bad in Japan for a long period of time," he said. "Even though for the time being things are slow here in California, people are anticipating a pick-up in the U.S. economy, particularly in trade and transportation."

The U.S. remains the only mature economy among members of the Organization for Economic Co-operation and Development that is in a growth mode, Swords said.

"Everybody else is shrinking, so ultimately the future of the economy lies in demographic fundamentals and among OEDC nations. California is still a hot spot," he said.

Japan-affiliated employment was rising a decade ago just as aerospace jobs were being eliminated in the Los Angeles area.

Last year, Japanese-affiliated companies employed as many as 105,000 workers in Southern California, according to a recent survey by the Japanese External Trade Organization of Los Angeles, also known as Jetro.

Those employees were paid a combined $7.3 billion in salaries and wages, said Satoshi Komatsuzaki, a spokesman for Jetro, a trade and investment organization with 80 offices worldwide.

But there is some evidence that Japanese firms are cutting back on overseas offices, he said. In addition, workers from Japan are having increased problems getting visas in the U.S. because of a crackdown by the Office of Homeland Security.