Business | Economy
Recession fears deepen in Japan
Business confidence among Japanese manufacturers remained negative for the fifth month in a row in Sep-tember and non-manufacturers' sentiment sank to a nearly 5-year low, a Reuters poll showed on Thursday, reflecting widespread gloom as the economy heads into recession.
- Agencies
- Published: 00:18 September 19, 2008
Tokyo: Business confidence among Japanese manufacturers remained negative for the fifth month in a row in September and nonmanufacturers' sentiment sank to a nearly 5-year low, a Reuters poll showed on Thursday, reflecting widespread gloom as the economy heads into recession.
Economists expect the business mood to sour further as US government efforts to prevent a financial meltdown have failed to stop a slide in global stock markets that dragged Japan's Nikkei average down 3 per cent yesterday.
The Reuters Tankan survey reinforced views that the economy, which shrank in the second quarter at its fastest pace in seven years, was losing support from corporate activity as its longest postwar expansion grinds to a halt.
"Behind the weak results is uncertainty over the outlook for domestic and overseas economies," said Naoki Iizuka, a senior economist at Mizuho Securities.
"The survey was held before the Lehman shock, so unfortunately business sentiment will likely worsen further ahead."
Turmoil toll
The weak readings mean the BOJ's September tankan survey, due out on October 1, will likely show a worsening of business sentiment from three months before, underscoring views that the central bank will keep interest rates unchanged at 0.5 per cent until late next year.
The survey found manufacturers' sentiment was at an index level of minus 14, up 2 points from a five-year low in August but staying negative for five straight months, while the mood among non-manufacturers worsened 4 points to minus 10, marking the lowest level since December 2003.
Both manufacturers and non-manufacturers expect business conditions to improve in the next three months, the poll of 215 firms taken from August 27 to September 12 found, although economists expect the market turmoil after the survey to have taken a toll.
"Sentiment at manufacturers improved slightly thanks to sectors such as automobiles but the basic trend remains poor, with companies facing worsening business conditions and dwindling profit margins," said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Securities.
"We must also note additional negative factors that happened after the survey such as the failure of Lehman Brothers and tumbling global stock markets. These will further weigh on Japanese corporate sentiment."
The index readings are derived by subtracting the percentage of respondents who say conditions are poor from those who say they are good. A negative index figure means most of those surveyed are pessimistic about conditions.
The Reuters Tankan is a monthly poll of Japanese firms that tracks the Bank of Japan's closely watched quarterly tankan survey.
Compared with three months earlier, around the time of the last BOJ tankan survey, the index fell 12 points for manufacturers and 8 points for non-manufacturers. While gasoline and other commodity prices have retreated from recent peaks, a positive impact has yet to be felt by many companies as they struggle to pass on high raw material costs to consumers.
Among those suffering were the hard-hit real estate sector, stung by a series of corporate bankruptcies due to the credit crunch, and electric machinery makers who had hoped for a boost from the Beijing Olympics.
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