TOKYO, April 1 – Japan\’s most closely watched measure of business confidence has fallen to an all-time low, the central bank said on Wednesday, as the nation slides deeper into its worst post-war recession.
Exports are about half what they were a year ago, unemployment is at a three-year high and consumers are spending less — all of which has shaken Japanese manufacturers who normally drive the world\’s second-largest economy.
The Bank of Japan said its quarterly Tankan survey of large makers of electronics, cars and other products found confidence even lower than in 1975, when the country was still in the wake of the oil shock.
"This Tankan clearly showed that the Japanese economy is literally faced with the worst recession in the nation\’s post-war history," said Hideki Matsumura, a senior analyst at the Japan Research Institute.
"The Japanese economy first suffered a slump in exports in the wake of the global financial crisis, and the negative impact has now spread to domestic demand," Matsumura told AFP.
Confidence tumbled to minus 58 in March from minus 24 the previous quarter, a record decline in the Tankan index, which measures the percentage of firms that think business conditions are good minus those that think they are bad.
The previous record low was minus 57 in 1975.
As companies hit by collapsing demand idle more plants and lay off workers, the economy is set to shrink 6.6 percent this year, far worse than Europe and the US, says the Organisation for Economic Cooperation and Development.
"No end to the recession is in sight yet because more and more bad news is expected to come at home and overseas," Matsumura said.
The Tankan found that manufacturers believed sentiment would stay gloomy, forecasting a confidence rating of minus 51 for June.
Major manufacturers said they expect a 62.7 percent drop in pre-tax profits in the 2008 financial year to March 31. They also forecast a 19.7 percent slump for the new fiscal year that began Wednesday, the survey showed.
Large firms across all sectors plan to trim their plant and equipment investment by 6.6 percent on average for the current fiscal year, in contrast to sharp gains in corporate capital spending in recent years.
"The results precisely reflected the tough current economic environment," Chief Cabinet Secretary Takeo Kawamura told a news conference, renewing the government\’s pledge to speedily compile fresh stimulus measures.
Japan\’s economy, which is officially in recession, shrank at an annualised pace of 12.1 percent in the last quarter of 2008.
On Tuesday, the government said the unemployment rate hit a three-year high of 4.4 percent in February, while consumer spending fell 3.5 percent month-to-month.
To revive Asia\’s biggest economy, Prime Minister Taro Aso outlined plans for a new stimulus package — Japan\’s fourth since October — before he left for the Group of 20 summit of world leaders due to be held in London on Thursday.
Aso gave no price tag, but reports have said the extra spending is expected to total more than 10 trillion yen (101 billion dollars) and aims to help create two million new jobs over the next three years.
"The Japanese economy is falling back into deflation," warned SMBC chief strategist Daisuke Uno.
"The government should expand the size of additional fiscal policies together with stock-boosting measures."