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Japan companies' confidence hits a fresh five-year low
Confidence among Japanese manufacturers sank to a fresh five-year low in August, a Reuters poll showed on Friday, as cost-push inflation and slack demand push the world's second-biggest economy closer to a recession.
- Reuters
- Published: 23:58 August 15, 2008
Tokyo: Confidence among Japanese manufacturers sank to a fresh five-year low in August, a Reuters poll showed on Friday, as cost-push inflation and slack demand push the world's second-biggest economy closer to a recession.
With wholesale price inflation at a 27-year high and consumer confidence at a record low, the monthly survey showed Japanese firms are increasingly feeling the pain of both high costs and sluggish consumer demand.
The survey, coming on the heels of data last week showing that Japan's economy shrank in the second quarter at its fastest pace in seven years, reinforced the view that Japan's longest expansion since World War Two is coming to an end.
The manufacturers index of the Reuters Tankan survey, a monthly poll of Japanese firms that tracks the Bank of Japan's (BoJ) closely watched quarterly tankan survey, tumbled to minus 16 in August from minus 10 in July.
The index is at its lowest since March 2003 when it hit minus 17. The poll of 224 firms was taken from July 28 to Aug. 12.
Expectations fail
"On top of high raw materials costs and sluggish US economy, the Olympics - contrary to our expectations - didn't help boost demand for household appliances," an official at an electric machinery firm said.
Morale among makers of electrical goods, metal products and machinery all slid to five-year lows as consumers and companies cut spending amid steep cost increases and a US economic malaise that is putting a brake on Japanese exports.
Service sector sentiment sank to the lowest since December 2003, with the index down 3 points to minus 6 in August.
The index readings are derived by subtracting the percentage of respondents who say conditions are poor from those who say they are good. A result below zero means more of those surveyed are pessimistic about conditions.
Manufacturers expect business conditions to improve slightly in the next three months, but non-manufacturers see their situation worsening further.
The BoJ tankan survey showed last month confidence falling to a five-year low in the second quarter, with firms expecting the mood to sour slightly over the three months to Sep-tember.
The central bank will probably downgrade its view of the economy at its review on August 18-19 in a signal that crumbling export markets can no longer offer factories enough business to keep Japan out of recession.
Money market futures are pricing in virtually no chance of a BoJ rate hike over the next year.
The government has acknowledged that Japan is either heading into a recession or is already in one, ending a growth cycle that began in early 2002, the longest in six decades.
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