Japan manufacturers’ confidence drops to 3-yr low

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By Hiroshi Hiyama AFP

TOKYO — Confidence among Japan’s biggest manufacturers dropped last quarter to its lowest level since Prime Minister Shinzo Abe kicked off his much-vaunted program to boost growth three years ago, a survey showed Friday. The poor reading on the Bank of Japan’s closely watched Tankan report will heap pressure on policymakers to unveil more stimulus, as evidence of a slowdown in the world’s No. 3 economy piles up. The report showed sentiment among major manufacturers came in at plus six in March, weaker than market expectations and way down from a plus 12 reading the previous quarter. The survey of more than 10,000 companies is the most comprehensive indicator of how Japan Inc is faring, and marks the difference between the percentage of firms that are upbeat and those that see conditions as unfavorable. While there were still more upbeat producers than pessimistic ones, confidence has been on a steady decline owing to fears about mainland China’s economy and weak global growth. Sentiment in the boardrooms of large non-manufacturing companies also fell, while big firms across a swath of industries plan to cut capital spending, in a reflection of an economy that is losing steam. “The pronounced drop in the headline index of today’s Tankan survey underlines that the recent strengthening of the yen has damaged business confidence and suggests that the Bank of Japan will announce more easing later this month,” research house Capital Economics said in a commentary. The BOJ launched an unprecedented monetary easing plan in early April 2013, a cornerstone of Abe’s plan to bring an end to years of the deflation that held back growth in the once-powerhouse economy.

“(The Tankan) doesn’t look very good — it’s become clear that the economy is weakening,” said Kohei Iwahara, director of economic research at Natixis Japan Securities. “We need a policy response, but the question is what.”