Gloomy Japanese Economic Figures

A key survey of business confidence in Japan has found that companies remain extremely pessimistic about their future prospects. The latest Bank of Japan quarterly 'Tankan' survey, as reported by the BBC, shows that business confidence has dropped to a 3-year low over the last three months.

The data includes a large manufacturers' index. This measures the difference between those firms saying economic conditions are favourable and those saying they are not. A negative number means more firms are pessimistic which fell to minus 38 from minus 33, its worst level since March 1999. However, most analysts had been predicting a number of minus 40 or worse.

The index covers large non-manufacturers as well. The confidence amongst these companies slipped to minus 22 from minus 17 in the previous survey. The survey also found that large companies intended to reduce capital spending by 6.5% in the current financial year, which was worse than expected.

'The figures are better than expected. They fell but they are not as grim,' said Ron Bevaqua of Commerzbank in Tokyo. '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,' said Mamoru Yamazaki, chief economist at Barclays Capital in Japan.

Analysts do now believe that Japan is deep in recession though. Other research published last week shows that economic growth in Japan has officially fallen to recessionary levels. The economy overall is thought to have shrunk 0.5% in the July to September period compared to the previous three months. Figures for the second quarter show a decline for the second successive period.

The view of most observers is that Japan is not alone in its difficulties. The United States is also officially in recession and Germany's economy is shrinking as well. This aside, the global slowdown has hit many Japanese companies hard, as many of them depend on exports to expand sales. The Organisation for Economic Co-operation and Development (OECD), for example, has already said that Japan's economy is likely to shrink by 0.75% this year, and by 1% next year.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.