The latest issue of Bank of Japan’s influential quarterly Tankan survey indicates that business confidence within the globe’s second largest economy fell to a three-year low over the last quarter.

Among the data used to construct the overall picture is an index of major manufacturers measuring the gap between firms believing economic conditions to be favourable and those of opposite view. The index fell to minus 38 from minus 33 [a negative number means more companies are pessimistic], its worst level since March 1999. Bad as this may seem, it still bettered analysts’ consensus prediction of minus 40 or worse.

The downward trend was mirrored among large non-manufacturers, where confidence slid to minus 22 from minus 17 in the previous quarter. Also worse than expected was the intention of large companies to slash capital expenditure by an average of 6.5% in the current financial year.

The entrail-rakers put a brave face on it. “The figures are better than expected. They fell but they are not as grim,’ said Ron Bevaqua of Commerzbank in Tokyo. Mamoru Yamazaki, chief economist at Barclays Capital in Japan was less sanguine: “The headline number for the big manufacturers is showing a slightly smaller decline than expected, but it nonetheless confirms that it is on a downtrend,” he said.

Although Japan’s woes are shared by the USA – also officially in recession – and Germany's wilting economy, the global slowdown has hit export-dependant Japanese companies harder than most. The Organisation for Economic Co-operation and Development (OECD) has opined that Japan's economy is likely to shrink by 0.75% this year, and by 1% next year.

News source: Daily Research News Online