Japan Business Confidence at All-Time Low

Tomoko A. Hosaka

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.