Major Japanese trading house Sumitomo Corp said yesterday it expected to post special losses of 145 billion yen (€1.11 billion) in the business year which ended this week as it slims down its business in the face of recession.

The announcement comes as many Japanese companies unveil restructuring plans to coincide with the new business year.

Noriaki Shimazaki, a Sumitomo director, said the company expected to post a combined 144.8 billion yen in special losses in the financial year that ended on March 31st, due mainly to a reduction in its riskbearing assets and securities appraisal losses.

Sumitomo, one of Japan's top five trading companies, said 70 billion yen was being set aside in reserves for losses expected from the sale and liquidation of some of its operations. It also said it would set aside 25 billion yen worth of loss reserves for overseas claims and would record a 7 billion yen loss due to early retirement payments for 150 workers over three years.

"These measures were taken in the hope of achieving the goals of our business reform package," a Sumitomo executive vice president, Takashi Nomura, said.

Nomura was referring to previous restructuring plans for the next two years, under which Sumitomo aims to refocus on core business while cutting its risk assets and workforce.

US credit rating agency Moody's Investors Service yesterday changed its outlook for Sumitomo to negative from stable, citing increasing uncertainty over possible additional losses from its large investment portfolio. It affirmed its Baa1 longterm debt rating for Sumitomo.

The firm revised its 1998-99 parent net forecast to a loss of 24 billion yen from an earlier forecast of a 15.00 billion yen profit and revised its 1998-99 group net forecast to a loss of 23 billion yen from an earlier forecast of a profit of 16 billion yen.

"Our operating profits have fallen due to longer-than-expected weakness in the domestic economy and the yen's strengthening in the second half of the business year," said Shimazaki.