Japan Business Confidence


Business confidence tumbles after quake

Sentiment of major manufacturers plummeted in the second quarter in the wake of the 11 March earthquake, according to the quarterly Tankan survey released by the Bank of Japan on 1 July. It is the first survey that fully reflects the impact of the triple disaster among large Japanese companies, as the previous appraisal was partially conducted before the quake. Business confidence among large manufacturers plunged from plus 6 points in the first quarter to minus 9 points in the second, which represents the lowest level since Q1 2010, but in any case, was not as deep as the record-low of minus 58 recorded in Q1 2009 in the midst of the financial crisis. In addition, the outturn came in below market expectations of a decline of 7 points. A negative number means pessimists outnumber optimists. Despite the drop in confidence, the Tankan survey suggests a V-shaped recovery, as big manufacturers are forecasting business sentiment to improve to plus 2 in the upcoming quarter, which is consistent with the string of recent positive economic indicators. Nevertheless, some analysts warn about the possibility of power shortages during the summer, which could drag down sentiment in the corporate sector and jeopardize the anticipated fast recovery. In addition, the survey also showed large companies planned to boost their capital spending by 4.2% in the financial year ending in March 2012, up sharply from a 0.4% cut planned in the previous survey.

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