World Markets

Return to Article

Japan Business Confidence at All-Time Low

The Associated Press

TOKYO -- The latest probe of Japan's ailing economy points toward a new diagnosis: split personality disorder.

Pummeled by an unprecedented slump in global demand, confidence at major Japanese manufacturers has fallen to an all-time low, a key central bank survey showed Wednesday. But the worst may be over for big exporters who plan to boost output this spring amid slimmer stockpiles and nascent expectations for a recovery in overseas economies.

Meanwhile, the outlook is bleaker than ever for workers, households and non-manufacturers -- all casualties of the ongoing cutbacks by Japan's global giants like Toyota(TM Quote) and Sony(SNE Quote).

Large manufacturers "have been bleeding heavily, but they have reacted the fastest of all corporations internationally by cutting back," said Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo. "This is why it's such a split situation. It's not good news for the domestic economy, but it is quite good for these companies overall."

The world's second-largest economy, which had relied on overseas demand to drive growth, has been hit particularly hard by a deep global slowdown that has sapped foreign sales of its cars and gadgets. A stronger yen has exacerbated the pain by eroding exporters' earnings abroad.

In the Bank of Japan's quarterly "tankan" survey for March, the closely watched sentiment index for large manufacturers stood at minus 58 -- the sixth straight quarter of decline and the worst reading ever.

The figure represents the percentage of companies saying business conditions are good minus those saying conditions are unfavorable. The lower the number, the greater the pessimism.

Big exporters have moved quickly to adjust by reducing shifts, suspending factory lines and slashing thousands of workers over the past few months. While their aggressive moves have suppressed inventory levels, it's no comfort for workers and families who have lost jobs.

Japan's unemployment rate rose to 4.4% in February, with analysts forecasting more job cuts in the months ahead, the government said Tuesday. Household spending was down sharply from a year earlier.

The tankan's sentiment index for major non-manufacturers, who depend heavily on domestic demand, deteriorated more than expected to minus 31 from minus 9 in the December survey.

The sentiment index for big manufacturers is forecast to improve to minus 51 in the next survey in June.

Prime Minister Taro Aso ordered his government Tuesday to come up with fresh stimulus measures, on top of about 12 trillion yen ($122 billion) in extra fiscal spending announced last year. Since taking office in September, Aso has launched two stimulus packages that include a cash handout to residents, lower highway tolls and support for the unemployed.