Japan Companies Say Business Conditions Are Worsening
Confidence among Japanese manufacturers fell to the lowest level in at least four years, adding to evidence that the economy's longest postwar expansion is faltering.
Sentiment among manufacturers with more than 1 billion yen ($10 million) in capital was minus 12.9 points this quarter compared with 5.2 three months earlier, a government survey showed today. That's the lowest since the report began in 2004.
Today's result may indicate the state of business sentiment before the April 1 release of the Bank of Japan's Tankan survey, the nation's most closely watched gauge of corporate confidence. That index will probably fall for a second quarter, marking the biggest drop in more than six years, according to economists surveyed by Bloomberg News.
“Manufacturers have a lot to worry about: the U.S. slowdown, the very strong yen, higher input costs,'' said Tomoko Fujii, head of economics and strategy at Bank of America Corp. in Tokyo. “The Tankan's got to be pretty weak.''
The yen traded at 99.84 per dollar at 11:57 a.m. in Tokyo from 99.52 before the report was published.
Large manufacturers plan to cut spending on factories and equipment by 6.1 percent in the year starting April 1, according to today's survey, which was jointly conducted by the Cabinet Office and Finance Ministry. They expect capital investment to rise 2.6 percent in the year ending March 31.
Pessimistic Companies
Confidence among all big companies also deteriorated, falling to minus 9.3 points from 0.5. A negative number means pessimists outnumber optimists http://us-fast-cash-now.com.
The government lowered its assessment of the economy, the world's second largest, for the second consecutive month last week as production and corporate earnings slowed.
Profits fell the most in the fourth quarter since the economy emerged from a recession in 2002, a separate report from the Finance Ministry this month showed.
The yen, which has gained 12 percent against the dollar this year, surged to a 12-year high last week on concern that the world's largest economy is headed for a recession. A stronger currency erodes the value of exporters' overseas profits when they are repatriated into yen.
The central bank's Tankan index of large manufacturer sentiment will slump to 13 points from 19 in December, according to the median estimate of 20 economists. That would be the sharpest decline since September 2001.
Unlike the Tankan, today's survey examines the degree of change in confidence from the previous quarter.
The Bank of Japan is surveying companies through the end of this month, making the Tankan Japan's most current gauge of business confidence. The government gathered most of its responses for today's report at the end of February, before the yen surged to the highest against the dollar since 1995.
That indicates the effect of the currency's gains may be more pronounced in the Tankan, said Kiichi Murashima, chief economist at Nikko Citigroup Ltd. in Tokyo.