Business confidence in most sectors has plunged sharply and may slip further, according to the Bank of Japan's quarterly "tankan" survey of business sentiment released Monday.
The deepening pessimism reflects not only stagnant consumption and housing investment following the consumption tax hike in April, but also the collapse of major financial institutions and Asia's financial crises. Firms also face difficulties in borrowing money from banks, which are trying to shrink their assets, according to the survey.
The diffusion index for major manufacturers, which have led the economy since April, plunged from 3 in September to minus 11 in the latest report. In the last report, the firms had predicted the index would only fall to plus 1. The confidence of major nonmanufacturers continued to fall as well, with the index dropping 5 points from the previous survey to end at minus 20.