A fall in Japanese business confidence may herald a new downturn for the nation’s economy – the third largest in the world after the US and China – analysts have warned.

Last week, the Tankan survey of business sentiment compiled by the Bank of Japan registered a slip in the diffusion index for large manufacturers to minus ten in March. The index, considered a barometer for the state of the economy as a whole, stood at minus nine in the last survey in December.

“A one-point drop in the index for big manufacturers appears subtle at first glance,” commented Kazuo Mizuno, chief economist at Mitsubishi Securities. “But if you throw in the impact of the war and the weak domestic markets, we could be looking at a shift in direction for the overall economy.”

The index is compiled by calculating the percentage of respondents expressing pessimism about the economy then subtracting it from the percentage indicating optimism.

Japan’s big exporters seemed particularly downbeat. Auto manufacturers remained generally positive with an index reading of plus 16, though this marks a 12-point tumble from the last survey. Electronics makers, meanwhile, stayed on a gloom-laden minus 29.

Data sourced from: The Asahi Shimbun (Japan); additional content by WARC staff