Business confidence in Japan plunges most in 34 years
Business confidence among Japan's largest manufacturers fell the most in 34 years, the Bank of Japan's quarterly Tankan survey revealed Monday.
An index that measures confidence among the largest makers of cars and electronics dropped to minus 24 from minus three, according to the survey, reported dpa.
A negative reading indicates a majority of businesses were pessimistic. The fifth quarterly decline in a row in business sentiment followed a record low in consumer confidence last month.
The fall indicated that many companies were likely to slash more jobs and drastically lower spending, which would push the world's second-largest economy into a deeper recession.
Japanese manufacturers said they planned sharp cuts in factory output as an export slowdown spreads to emerging markets, which propped up Japanese car and electronics makers when the demand from the United States and Europe dwindled amid the global financial crisis.
Sony Corp recently announced the slashing of 8,000 full-time jobs in its worldwide operations. Previously, temporary workers were usually hit by job cuts in Japan, where increasing numbers of workers have been taking to the streets to protest firings as unemployment rises at its fastest rate since the "lost decade" of deflation in the 1990s.
The Japanese yen's 17-per-cent gain against the dollar since September has also lowered the value of Japanese producers' overseas sales.
The 21-point decrease in the Tankan was the largest since February 1975, but analysts said it was expected. As a result, stocks gained in Tokyo, helped by speculation that US automakers would receive a government bail-out and on the rise of the dollar against the yen.
The benchmark Nikkei 225 Stock Average surged 5.21 per cent to 8,664.66 while the broader Topix index of all first-section issues also was up 4.13 per cent at 846.93.
But the grim business outlook could increase pressure on the Bank of Japan to further sink interest rates. The central bank next meets Thursday and Friday.
Last month, its governor, Masaaki Shirakawa, described the economic decline as "drastic," and the bank cut its key lending rate to 0.3 per cent in October.
On Friday, Japanese Prime Minister Taro Aso announced a 23- trillion-yen (255-billion-dollar) assistance package for the economy, while warning of a sharpening of the country's recession and a possible re-emergence of deflation.
Aso said that tax cuts for homeowners, around 13 trillion yen in support for small-and-medium enterprises and other direct support for businesses were included in the plan.
The Japanese government announced a 26.9-trillion-yen economic stimulus package in October, which parliament has yet to pass.