Japanese business confidence tumbled to a record low in March, a close-watched Bank of Japan survey showed, highlighting the pain businesses face as the global crisis pushes the economy deeper into recession.
Sentiment among big manufacturers fell at the fastest pace on record as slumping global demand has halved exports and slashed production of cars and electronics, hurting an economy already mired in its worst recession since World War Two.
“The economy may reach a bottom in the summer but is not likely to return to previous levels of growth any time soon. Capital expenditure numbers are the second weakest on record, showing companies are still cautious,” said Norio Miyagawa, senior economist at Shinko Research Institute.
“We cannot expect a quick recovery in export demand. Domestic demand is also weak.”
The deep pessimism was expected. The BOJ index gauging sentiment among big manufacturers slid to minus-58, more than double the minus-24 in the previous survey three months earlier but only slightly worse than the median market forecast of minus-55.
That was the weakest reading for Japan's big manufacturers since the BOJ started surveying them during the first 1970s oil crisis, illustrating the extent of damage done by plunging global demand on export-reliant Japan.
An index for big service-sector firms also fell at a record pace to minus-31, the lowest since 1999, as rising unemployment and falling wages hurt consumption.
Sentiment for the electric machinery and automobile sectors hit fresh record lows, the tankan survey showed, as exports plunged on slumping global demand.
Companies were slightly less pessimistic about the months ahead. The three-month outlook index for big manufacturers was a slightly higher minus-51, while that of non-manufacturers was minus-30.
The weak sentiment saw the yen dip to 99.35 yen per dollar from 99.00 per dollar before the data but a media report that US President Obama has determined bankruptcy is best for General Motors saw it rebound again.
“The tankan figures were at the lower range of initial forecasts. Markets had been factoring in a weak result but the initial reaction to the figures was yen selling,” said Koji Fukaya, senior currency strategist, at Deutsche Bank.
The outlook index for June points to an improvement but it's hard to trust this enough to reflect it in forex trading.”
Hit by plunging global demand and weak consumption at home, Japan's economy shrank 3.2 per cent in the fourth quarter, its fastest decline since the 1974 oil crisis and twice as fast as the US and euro zone economies.
Analysts expect Japan's economy to keep shrinking in the first half of this year - meaning a record five quarters of contraction - as weak global demand hits an export-reliant economy.
Reuters