Japan: Business confidence slumps after the quake
April 4, 2011
The disasters had a notable impact on business confidence according to the quarterly Tankan survey published by the Bank of Japan (BoJ) on 4 April. The survey was conducted between 24 February and 31 March, enabling the BoJ to publish pre- and post-quake results separately. Business confidence among large manufacturers increased from 5 in the fourth quarter 2010 survey to 7 in the pre-quake first quarter survey. The post-quake survey still shows a level of 6. The forecast results reveal a more notable deterioration in business confidence, as the outlook improved from minus 2 in Q4 to plus 3 in the pre-quake Q1 poll but fell back to minus 2, based on the results collected after the quake. In fact, the deterioration may be even worse, as the post-quake count may include surveys that were filled out before 11 March but sent in later. Moreover, in the immediate aftermath of the disaster the economic damage and the nuclear crisis were broadly underestimated. Therefore, the business confidence survey is unlikely to accurately reflect the current sentiment among businesses. That said, confidence does not necessarily need to fall in the next survey, as beginning reconstruction efforts and a likely improvement of the situation at Fukushima could buttress sentiment going forward.