Japanese manufacturers' sentiment deteriorates for 1st time in 7 quarters

13:22, December 15, 2010      

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Business confidence among Japan's largest manufacturers worsened during the three months through December from the previous quarter, the Bank of Japan (BOJ) said in a report on Wednesday.

The quarterly Tankan index of sentiment at large Japanese manufacturers fell to plus 5 from 8 in the previous quarter, with the Q3 figure in the current fiscal year (April 2010-March 2011) marking the first fall in seven quarters, the central bank said.

However the Q3 figure did beat the median market forecast for a reading of plus 3.

A positive number means optimistic businesses outnumber pessimistic ones regarding business conditions.

The index of major non-manufacturers' confidence for the quarter stood at plus 1, down from plus 2 in the previous quarter.

The diffusion index gauges the percentage of companies reporting favorable business conditions minus those reporting a negative conditions.

The survey also showed big companies in both the manufacturing and non-manufacturing sectors plan to increase capital investment by 2.9 percent in fiscal 2010 from the previous year.

The raise in capital spending across both sectors was better than the median forecast for a 2.7 percent increase.

"The economy has entered a lull-like condition," Ryutaro Kono, chief economist at BNP Paribas in Tokyo, said wit regard to the Tankan survey.

"The mood in the manufacturing sector has been undermined by slowing exports and the end of stimulus programs, with yen appreciation being just a secondary factor," he said.

The report also revealed that companies expect sentiment to fall to minus 2 in March.

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